The Performance Guarantee Agreement is a crucial document in Nigerian business transactions, particularly in sectors requiring significant performance commitments. It serves as a risk mitigation tool where one party provides financial backing for another party's obligations. This agreement type is commonly used in construction projects, tender submissions, supply contracts, and other commercial arrangements where performance security is required. Under Nigerian law, these guarantees must comply with local banking regulations, including BOFIA 2020 and CBN guidelines. The document typically includes detailed provisions on the guarantee's scope, demand procedures, validity period, and enforcement mechanisms. It's particularly relevant in the current Nigerian business environment where security for performance is increasingly important in commercial transactions.
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1. Parties: Identification of the Guarantor, Principal Debtor/Obligor, and Beneficiary
2. Background: Context of the underlying obligation and purpose of the guarantee
3. Definitions: Definitions of key terms used throughout the agreement
4. Guarantee and Indemnity: Core provisions detailing the guarantee obligations and indemnity terms
5. Scope of Guarantee: Specific details of what is being guaranteed and the extent of coverage
6. Duration and Validity: Term of the guarantee and conditions for its validity
7. Demands and Payments: Process and conditions for making demands under the guarantee and payment terms
8. Guarantor's Representations and Warranties: Legal statements and assurances provided by the guarantor
9. Principal Obligations: Description of the underlying obligations being guaranteed
10. Enforcement and Remedies: Rights and procedures for enforcing the guarantee
11. Preservation of Rights: Provisions ensuring the beneficiary's rights are maintained
12. Notices: Communication procedures and contact details
13. Governing Law and Jurisdiction: Specification of Nigerian law as governing law and jurisdiction details
14. Execution Clause: Formal execution block for all parties
1. Counter-Indemnity: Additional indemnity provisions from the principal debtor to the guarantor, used when there's a back-to-back arrangement
2. Security Provisions: Details of any security provided to support the guarantee, included when specific assets are pledged
3. Step-In Rights: Provisions allowing the guarantor to step into the principal's position, used in complex commercial arrangements
4. Currency Provisions: Specific provisions for handling multiple currencies, included for international transactions
5. Tax Provisions: Handling of tax implications and withholding requirements, needed for significant financial guarantees
6. Assignment and Transfer: Provisions governing the transfer of guarantee rights, included when transferability is contemplated
7. Force Majeure: Provisions for unforeseen circumstances, included in long-term or complex guarantees
1. Form of Demand: Template for making valid demands under the guarantee
2. Underlying Contract: Copy or summary of the principal contract being guaranteed
3. Payment Details: Banking and payment information for all parties
4. Corporate Authorizations: Copies of relevant corporate approvals and authorizations
5. Security Details: Details of any security or collateral provided
6. Conditions Precedent: List of conditions that must be satisfied before the guarantee becomes effective
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