The Advance Performance Guarantee is a fundamental document in South African commercial transactions, particularly in projects requiring substantial upfront funding. It is typically required when a project owner or employer needs to make advance payments to a contractor or supplier to commence work or secure materials, but requires security against the risk of non-performance or misuse of funds. The guarantee, issued by a reputable financial institution, provides assurance that the advance payment will be repaid if the contractor fails to perform their obligations. The document must comply with South African banking regulations and financial services legislation, including the Banks Act and Financial Sector Regulation Act. It includes specific provisions for the guarantee amount, validity period, conditions for calling on the guarantee, and reduction mechanisms as the advance payment is recovered through the progress of work.

1. Parties: Identification of the Guarantor (bank/financial institution), the Beneficiary (party receiving the guarantee), and the Principal (party whose performance is being guaranteed)

2. Background: Context of the guarantee, including reference to the underlying contract or tender

3. Definitions: Key terms used in the guarantee document

4. Guarantee Amount: Specific amount of the advance payment being guaranteed, currency, and any adjustment mechanisms

5. Scope of Guarantee: Nature and extent of the guarantee obligation

6. Conditions for Payment: Requirements and process for making a claim under the guarantee

7. Duration and Validity: Commencement date, expiry date, and any extension provisions

8. Reduction Mechanism: Process and conditions for reducing the guarantee amount as advance payment is recovered

9. Documentary Requirements: Documents required to accompany any demand under the guarantee

10. Governing Law and Jurisdiction: Specification of South African law as governing law and jurisdiction for disputes

11. Notices: Communication requirements and contact details for all parties

12. Execution: Signature blocks and execution formalities