The Performance Guarantee Bond is a crucial security instrument in commercial transactions under Dutch law, particularly used in construction, infrastructure projects, and international trade. It provides financial security to the beneficiary (typically a project owner or employer) against the risk of non-performance or default by the principal (usually a contractor or supplier). The document specifies the guaranteed amount, typically ranging from 5% to 15% of the underlying contract value, and outlines the conditions and procedures for calling upon the guarantee. This type of bond is especially important in large-scale projects where significant financial commitments are involved and where the beneficiary requires security against potential defaults or performance failures. The guarantee is typically issued by a bank or financial institution and must comply with both Dutch civil law requirements and financial regulations, including the Dutch Financial Supervision Act (Wet op het financieel toezicht).
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Key Requirements PROMPT example:
Performance Guarantee Bond
"I need a Performance Guarantee Bond under Dutch law for a renewable energy project where our bank will guarantee €5 million to cover our contractor's obligations in constructing a wind farm, with the guarantee period running until March 2025."
1. Parties: Identification of the Guarantor (typically a bank or financial institution), the Principal (party whose performance is being guaranteed), and the Beneficiary
2. Background: Context of the underlying contract or obligation being guaranteed and the reason for providing the guarantee
3. Definitions: Key terms used throughout the guarantee, including 'Guaranteed Obligations', 'Maximum Liability Amount', and 'Expiry Date'
4. Guarantee: Core guarantee provisions, including the scope and nature of the guarantee obligations
5. Maximum Liability: Specification of the maximum amount for which the guarantor can be held liable
6. Demand Requirements: Formal requirements for making a valid demand under the guarantee, including format and supporting documentation
7. Payment Terms: Timeframe and conditions for payment upon receipt of a valid demand
8. Duration and Expiry: Term of the guarantee and conditions for expiry or termination
9. Governing Law and Jurisdiction: Confirmation of Dutch law as governing law and designation of competent courts
1. Counter-Indemnity: Terms under which the Principal indemnifies the Guarantor - included when the guarantee document also serves as the counter-indemnity agreement
2. Assignment and Transfer: Provisions regarding the transferability of the guarantee - included when transfer rights are to be specifically addressed
3. Reduction Provisions: Mechanisms for reducing the guarantee amount over time - included for long-term projects with phased completions
4. Multiple Beneficiaries: Special provisions for cases with more than one beneficiary - included in syndicated or multi-party arrangements
5. Force Majeure: Provisions dealing with extraordinary events - included when specific force majeure protection is required
6. Language Provisions: Provisions regarding official language and translations - included when multiple language versions exist
7. Anti-Money Laundering Compliance: Specific compliance requirements - included when required by the guarantor's internal policies
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Extract: Relevant excerpts from the underlying contract being guaranteed
3. Authorized Signatories: List of persons authorized to make demands under the guarantee
4. Payment Instructions: Banking and payment details for guarantee payments
5. Performance Milestones: Schedule of project milestones relevant to the guarantee (if applicable)
Authors
Relevant legal definitions
Guaranteed Obligations
Maximum Liability Amount
Underlying Contract
Principal
Beneficiary
Guarantor
Demand
Valid Demand
Expiry Date
Business Day
Guarantee Period
Payment Period
Event of Default
Guaranteed Sum
Effective Date
Authorized Representative
Demand Notice
Supporting Documents
Bank Business Day
Permitted Transfer
Working Day
Force Majeure Event
Material Adverse Change
Governing Law
Jurisdiction
Dutch Business Day
Original Guarantee
Counter-Indemnity
Security Interest
Guarantee Currency
Performance Default
Project
Contract Price
Completion Date
Defects Liability Period
Affiliate
Available Amount
Bank Guarantee
Claim
Default Interest Rate
Guarantee Fee
Payment Instructions
Reduction Schedule
Release Date
Required Currency
Maximum Liability Amount
Underlying Contract
Principal
Beneficiary
Guarantor
Demand
Valid Demand
Expiry Date
Business Day
Guarantee Period
Payment Period
Event of Default
Guaranteed Sum
Effective Date
Authorized Representative
Demand Notice
Supporting Documents
Bank Business Day
Permitted Transfer
Working Day
Force Majeure Event
Material Adverse Change
Governing Law
Jurisdiction
Dutch Business Day
Original Guarantee
Counter-Indemnity
Security Interest
Guarantee Currency
Performance Default
Project
Contract Price
Completion Date
Defects Liability Period
Affiliate
Available Amount
Bank Guarantee
Claim
Default Interest Rate
Guarantee Fee
Payment Instructions
Reduction Schedule
Release Date
Required Currency
Clauses
Parties
Recitals
Definitions
Guarantee Obligations
Maximum Liability
Term and Duration
Demand Requirements
Payment Terms
Reduction and Release
Assignment and Transfer
Representations and Warranties
Communications
Notices
Amendments
Severability
Waiver
Set-Off Rights
Counter-Indemnity
Costs and Expenses
Confidentiality
Force Majeure
Compliance with Laws
Anti-Money Laundering
Sanctions Compliance
Currency Provisions
Tax
Governing Law
Jurisdiction
Dispute Resolution
Entire Agreement
Language
Execution
Recitals
Definitions
Guarantee Obligations
Maximum Liability
Term and Duration
Demand Requirements
Payment Terms
Reduction and Release
Assignment and Transfer
Representations and Warranties
Communications
Notices
Amendments
Severability
Waiver
Set-Off Rights
Counter-Indemnity
Costs and Expenses
Confidentiality
Force Majeure
Compliance with Laws
Anti-Money Laundering
Sanctions Compliance
Currency Provisions
Tax
Governing Law
Jurisdiction
Dispute Resolution
Entire Agreement
Language
Execution
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
Manufacturing
Energy and Utilities
Real Estate Development
International Trade
Engineering and Technology
Government and Public Sector
Telecommunications
Oil and Gas
Relevant Teams
Legal
Finance
Treasury
Risk Management
Procurement
Commercial
Compliance
Credit
Project Management
Business Development
Relevant Roles
Legal Counsel
Contract Manager
Project Manager
Finance Director
Commercial Director
Risk Manager
Treasury Manager
Procurement Manager
Business Development Manager
Company Secretary
Compliance Officer
Credit Risk Officer
Senior Banker
Project Finance Manager
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