The Payment And Performance Guarantee is a crucial security instrument in Hong Kong's commercial landscape, commonly used in large-scale construction projects, international trade, and complex commercial transactions. It provides comprehensive protection by combining two types of security: payment guarantees (ensuring financial obligations are met) and performance guarantees (ensuring contractual duties are fulfilled). This document is particularly relevant when there are concerns about both the financial capacity and operational capability of a contracting party. Under Hong Kong law, these guarantees must be in writing and typically include specific provisions regarding demand procedures, maximum liability caps, and cure periods. They are especially common in construction contracts, project finance, and international trade transactions where both monetary and performance risks need to be mitigated.

1. Parties: Identifies the Guarantor, Principal (the party whose obligations are being guaranteed), and Beneficiary of the guarantee

2. Background: Sets out the context of the underlying transaction and why the guarantee is required

3. Definitions: Defines key terms used throughout the guarantee, including 'Guaranteed Obligations', 'Guarantee Period', and 'Maximum Liability'

4. Guarantee and Indemnity: Core section containing the guarantee obligations and indemnity provisions

5. Scope of Guarantee: Defines exactly what obligations are covered by the guarantee and any limitations

6. Duration: Specifies when the guarantee becomes effective and when it terminates

7. Payment Provisions: Details the mechanism and timing for payments under the guarantee

8. Demand Requirements: Specifies the form and process for making demands under the guarantee

9. Guarantor's Representations and Warranties: Key statements about the Guarantor's capacity and authority

10. Continuing Security: Confirms the guarantee remains in force despite various events

11. No Discharge: Lists circumstances that will not discharge the Guarantor's obligations

12. Currency: Specifies payment currency and exchange rate provisions

13. Costs and Expenses: Allocation of costs related to the guarantee

14. Notices: Communication procedures between parties

15. Assignment: Rights of parties to assign their rights under the guarantee

16. Governing Law and Jurisdiction: Specifies Hong Kong law and jurisdiction