The Advance Payment Guarantee Letter is a critical financial instrument used in commercial transactions where one party (typically a buyer or employer) needs to make advance payments to another party (usually a seller or contractor) but requires security for such payments. This guarantee, governed by Swiss law, provides assurance that the advance payment will be returned if the contracted goods are not delivered or services are not performed as agreed. The document is commonly used in international trade, construction projects, and large equipment procurement, where substantial advance payments are required. It contains specific details about the guaranteed amount, validity period, conditions for claims, and expires either on a fixed date or upon fulfillment of certain conditions. Swiss law provides a particularly strong framework for such guarantees due to its sophisticated banking regulations and well-established commercial law principles.
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1. Bank Details and Reference: Issuing bank's letterhead, contact details, and guarantee reference number
2. Date and Place: Place of issuance and date of the guarantee
3. Beneficiary Details: Full name and address of the party receiving the guarantee (typically the buyer/employer)
4. Principal Details: Full name and address of the party requesting the guarantee (typically the seller/contractor)
5. Underlying Contract Reference: Details of the main contract including reference number, date, and brief description of scope
6. Guarantee Amount: The maximum amount guaranteed, currency, and any automatic reduction clauses
7. Purpose of Guarantee: Clear statement that this is an advance payment guarantee and its specific purpose
8. Conditions for Payment: Terms under which the guarantee can be called, including required documentation and format of demand
9. Expiry Provisions: Validity period, expiry date, and/or conditions for expiry of the guarantee
10. Governing Law and Jurisdiction: Explicit statement of Swiss law governance and jurisdiction
11. Signature Block: Authorized signatures from the issuing bank
1. Language Clause: Required when the guarantee might be used internationally, specifying the prevailing language version
2. URDG 758 Application: Optional reference to ICC Uniform Rules for Demand Guarantees if agreed by parties
3. Transfer Provisions: Include when the guarantee needs to be transferable
4. Reduction Schedule: Include when the guarantee amount reduces progressively according to specific milestones
5. Counter-Guarantee Reference: Required when issued under a counter-guarantee structure
6. Special Payment Conditions: Include when there are specific requirements for making or processing claims
1. Form of Demand: Template for making a claim under the guarantee
2. Copy of Advance Payment Details: Evidence of the advance payment made or to be made
3. Authentication Details: If required, SWIFT or other authentication information
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