The Advance Payment Guarantee Bond is a crucial financial security instrument in Indian business transactions, particularly in sectors requiring substantial upfront payments. It is typically used when a buyer needs to make advance payments to a contractor or supplier but requires security against potential non-performance or default. The document, governed by Indian law, establishes a three-way relationship between the guarantor (usually a bank), the principal (contractor/supplier receiving the advance), and the beneficiary (party making the advance payment). The guarantee typically covers the full amount of the advance payment and includes provisions for gradual reduction as the contract progresses. This instrument is essential in large-scale projects, particularly in construction and manufacturing, where significant mobilization costs are involved. The document must comply with Indian banking regulations, contract law, and stamp duty requirements.
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1. Parties: Identification of all parties: the Guarantor (usually a bank), the Principal (contractor/supplier), and the Beneficiary (employer/buyer)
2. Background: Context of the underlying contract and the requirement for advance payment guarantee
3. Definitions: Key terms used in the guarantee including 'Guaranteed Sum', 'Underlying Contract', 'Advance Payment', etc.
4. Guarantee: Core guarantee commitment, including the guaranteed amount and conditions
5. Scope of Guarantee: Specific details of what the guarantee covers and the circumstances under which it can be invoked
6. Duration and Validity: Term of the guarantee, including start date and expiry conditions
7. Demand Requirements: Process and conditions for making a claim under the guarantee
8. Payment Terms: Timeframe and method for payment upon valid demand
9. Reduction Clause: Provisions for progressive reduction of guarantee amount based on contract progress
10. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction
11. Execution: Signature blocks and execution formalities
1. Assignment and Transfer: Include when the guarantee needs to be transferable or assignable
2. Foreign Law Compliance: Required for international transactions or when parties are from different jurisdictions
3. Force Majeure: Include when specific force majeure provisions are needed beyond standard banking practice
4. Language: Include when the guarantee might be translated or used in multiple languages
5. Notice Requirements: Include when specific communication protocols need to be established
6. Dispute Resolution: Include when specific arbitration or alternative dispute resolution mechanisms are required
1. Schedule 1 - Underlying Contract Details: Details of the main contract between Principal and Beneficiary
2. Schedule 2 - Form of Demand: Prescribed format for making a demand under the guarantee
3. Schedule 3 - Payment Schedule: Schedule of advance payment and corresponding reduction in guarantee amount
4. Schedule 4 - Supporting Documents: List of required supporting documents for guarantee activation and claims
5. Appendix A - Bank Details: Banking information for all parties involved
6. Appendix B - Special Conditions: Any special terms or conditions specific to the guarantee
Relevant legal definitions
Advance Payment
Beneficiary
Business Day
Contract
Demand
Effective Date
Expiry Date
Guarantee Amount
Guaranteed Obligations
Guarantor
Principal
Project
Reduction Schedule
Supporting Documents
Underlying Contract
Valid Claim
Working Day
Force Majeure Event
Material Adverse Effect
Notice
Permitted Assignment
Relevant Jurisdiction
Security Interest
Stamp Duty
Bank Guarantee
Default Event
Indian Law
Performance Milestone
Recovery Period
Authorized Representative
Beneficiary
Business Day
Contract
Demand
Effective Date
Expiry Date
Guarantee Amount
Guaranteed Obligations
Guarantor
Principal
Project
Reduction Schedule
Supporting Documents
Underlying Contract
Valid Claim
Working Day
Force Majeure Event
Material Adverse Effect
Notice
Permitted Assignment
Relevant Jurisdiction
Security Interest
Stamp Duty
Bank Guarantee
Default Event
Indian Law
Performance Milestone
Recovery Period
Authorized Representative
Clauses
Guarantee Obligation
Duration and Validity
Payment Terms
Demand Process
Reduction Mechanism
Representations and Warranties
Assignment and Transfer
Enforcement
Governing Law
Jurisdiction
Notices
Amendment
Severability
Force Majeure
Waiver
Stamp Duty
Indemnification
Default Events
Claim Procedure
Compliance
Counter Guarantee
Dispute Resolution
Bank's Rights
Beneficiary's Rights
Principal's Obligations
Documentation Requirements
Currency Provisions
Communications
Termination
Authority
Duration and Validity
Payment Terms
Demand Process
Reduction Mechanism
Representations and Warranties
Assignment and Transfer
Enforcement
Governing Law
Jurisdiction
Notices
Amendment
Severability
Force Majeure
Waiver
Stamp Duty
Indemnification
Default Events
Claim Procedure
Compliance
Counter Guarantee
Dispute Resolution
Bank's Rights
Beneficiary's Rights
Principal's Obligations
Documentation Requirements
Currency Provisions
Communications
Termination
Authority
Relevant Industries
Construction
Infrastructure
Manufacturing
Engineering
Defense
Energy
Telecommunications
Heavy Industries
Government/Public Sector
Real Estate Development
Mining
Oil and Gas
Relevant Teams
Legal
Finance
Treasury
Procurement
Commercial
Risk Management
Compliance
Project Management
Contract Administration
Business Development
Relevant Roles
Project Manager
Contract Manager
Financial Controller
Treasury Manager
Legal Counsel
Procurement Manager
Chief Financial Officer
Risk Manager
Commercial Director
Business Development Manager
Bank Relationship Manager
Company Secretary
Compliance Officer
Project Director
Finance Director
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