The Contract Performance Guarantee is a fundamental risk management instrument in Hong Kong's commercial landscape, particularly vital in construction, infrastructure, and large-scale service contracts. It provides financial security to project owners or employers by ensuring that a third party (typically a bank) will compensate them if the contractor fails to perform its obligations. The guarantee must comply with Hong Kong's legal framework, including banking regulations and contract law principles. The document typically specifies the guaranteed sum (usually a percentage of the contract value), validity period, conditions for demands, and payment obligations. Used extensively in commercial transactions where performance risk needs to be managed, the Contract Performance Guarantee offers protection to beneficiaries while allowing principals to secure large contracts without tying up significant capital.

1. Parties: Identifies the Guarantor (typically a bank or financial institution), the Beneficiary (party receiving the guarantee), and references to the Principal (party whose performance is being guaranteed)

2. Background: Describes the underlying contract being guaranteed and explains the context for the guarantee

3. Definitions: Defines key terms used throughout the guarantee, including 'Guaranteed Obligations', 'Guaranteed Sum', and other relevant terms

4. Guarantee and Indemnity: Core section detailing the guarantee obligations, including the maximum guaranteed amount and the scope of the guarantee

5. Demand Requirements: Specifies the form, content, and process for making a demand under the guarantee

6. Duration and Release: States the effective period of the guarantee and conditions for its release or expiry

7. Payment Obligations: Details the timing and manner of payments following a valid demand

8. Representations and Warranties: Standard representations by the Guarantor regarding its capacity and authority

9. No Discharge or Waiver: Confirms that the guarantee remains valid despite changes to the underlying contract or other circumstances

10. Assignment and Transfer: Restrictions on assignment or transfer of rights under the guarantee

11. Notices: Specifies how formal communications between parties should be made

12. Governing Law and Jurisdiction: Confirms Hong Kong law as governing law and jurisdiction for disputes