A Contract Performance Guarantee is commonly used in commercial transactions where one party seeks assurance of the other party's performance. Under English and Welsh law, these guarantees provide security against non-performance or default of contractual obligations. They are particularly common in construction, infrastructure, and large-scale commercial projects where the financial consequences of non-performance can be significant. The guarantee typically specifies the maximum liability amount, conditions for calling the guarantee, and the mechanism for making claims. It serves as a risk management tool, providing the beneficiary with immediate access to funds without having to prove actual losses.
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1. Parties: Identifies the guarantor, beneficiary, and principal obligor
2. Background: Context of the underlying contract and reason for guarantee
3. Definitions: Key terms used throughout the guarantee
4. Guarantee and Indemnity: Core obligations of the guarantor including primary and secondary obligations
5. Scope of Guarantee: Extent and limitations of the guaranteed obligations
6. Preservation of Rights: Provisions ensuring guarantee remains valid despite variations to underlying contract
7. Representations and Warranties: Guarantor's confirmations about its capacity and authority
8. Duration: Term of the guarantee and conditions for expiry
9. Payment Provisions: Terms for making payments under the guarantee including timing and method
10. Governing Law and Jurisdiction: Specifies English and Welsh law as applicable law and jurisdiction of courts
1. Step-in Rights: Rights of guarantor to take over performance of the underlying contract
2. Counter-indemnities: Protection for guarantor against principal obligor's default
3. Assignment and Transfer: Rights to transfer or assign the guarantee to third parties
4. Currency Provisions: Specific provisions for cross-border guarantees involving multiple currencies
5. Tax Gross-up: Provisions dealing with tax deductions from guarantee payments
1. Form of Demand: Standard template for making claims under the guarantee
2. Underlying Contract: Copy or summary of the contract being guaranteed
3. Corporate Authorizations: Evidence of authority to provide guarantee including board resolutions
4. Guarantee Amount Schedule: Schedule detailing the maximum guaranteed amounts and any reduction mechanisms
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