The Performance Letter of Guarantee is a crucial financial instrument in commercial transactions under Swiss law, particularly used in construction, infrastructure, and international trade contexts. It provides security to project owners or buyers (beneficiaries) by ensuring that they can claim compensation from a bank if a contractor or supplier (principal) fails to meet their contractual obligations. The document typically specifies a maximum guarantee amount, validity period, conditions for making claims, and required supporting documentation. This type of guarantee is particularly valued in Switzerland and international transactions due to the country's strong banking sector and reliable legal framework. The Performance Letter of Guarantee must comply with Swiss banking regulations and the Swiss Code of Obligations, often incorporating international standards such as the ICC Uniform Rules for Demand Guarantees when used in international transactions.
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1. Bank Details and Reference: Identification of the issuing bank, reference numbers, and date of issuance
2. Beneficiary Details: Full name and address of the party in whose favor the guarantee is issued
3. Principal Details: Full name and address of the party whose performance is being guaranteed
4. Underlying Transaction: Reference to the main contract or obligation being guaranteed, including contract number and date
5. Guarantee Amount: The maximum sum guaranteed, currency, and any automatic reduction clauses
6. Scope of Guarantee: Specific performance obligations covered by the guarantee
7. Conditions for Demand: Requirements and documentation needed for claiming under the guarantee
8. Expiry Terms: Validity period of the guarantee and conditions for expiry
9. Payment Terms: Timeline and process for payment upon valid demand
1. Governing Law and Jurisdiction: While Swiss law is applicable, explicit confirmation may be included particularly for international transactions
2. Transfer Provisions: Include when the guarantee needs to be transferable to another beneficiary
3. Reduction Clauses: Include when the guarantee amount should reduce according to specific project milestones
4. Language Declaration: Required when the guarantee is issued in multiple languages
5. URDG Declaration: Include when the guarantee is subject to ICC Uniform Rules for Demand Guarantees
6. Counter-Guarantee Reference: Include when issued under a counter-guarantee structure
1. Demand Format: Standard format for making a demand under the guarantee
2. Project Milestone Schedule: If applicable, schedule of project milestones linked to guarantee reduction
3. Supporting Documents List: Detailed list of documents required to accompany any demand
4. Authorized Signatories: List of persons authorized to make demands under the guarantee
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