The Payment and Performance Guarantee is a crucial financial instrument in commercial transactions under Dutch law, commonly used in construction, infrastructure, and large-scale commercial projects. It serves as a risk mitigation tool where significant financial or performance obligations need to be secured. The guarantee can be called upon in case of default in either payment or performance of the underlying obligations, providing the beneficiary with immediate access to funds or performance assurance without first having to pursue the principal debtor. This document type is particularly relevant in the Netherlands' sophisticated financial and commercial markets, where such guarantees often form part of larger transaction structures. The guarantee must comply with Dutch financial regulations when issued by financial institutions and follows specific requirements under the Dutch Civil Code regarding form and content. It typically includes detailed provisions about the guaranteed obligations, demand procedures, and maximum liability amounts.
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1. Parties: Identification of the Guarantor, Principal Debtor (the party whose obligations are being guaranteed), and Beneficiary
2. Background: Context of the guarantee, including reference to the underlying agreement being guaranteed
3. Definitions: Definitions of key terms used throughout the guarantee
4. Guarantee: Core guarantee provisions, including the scope and nature of the guaranteed obligations
5. Maximum Liability: Specification of the maximum amount for which the guarantor can be held liable
6. Duration: Term of the guarantee, including commencement and expiry dates
7. Demand Requirements: Process and formal requirements for making a demand under the guarantee
8. Payment Terms: Timing and method of payment following a valid demand
9. Guarantor's Obligations: Detailed description of the guarantor's obligations and undertakings
10. Independent Obligation: Confirmation that the guarantee is independent from the underlying contract
11. No Discharge: Circumstances that do not discharge the guarantor from their obligations
12. Representations and Warranties: Guarantor's representations regarding their capacity and authority
13. Governing Law and Jurisdiction: Specification of Dutch law as governing law and jurisdiction provisions
14. Notices: Requirements for formal communications between parties
15. Execution: Signature blocks and execution formalities
1. Counter-Guarantee: Required when there is a counter-guarantor involved in the structure
2. Step-in Rights: Include when the guarantor has the right to take over the principal debtor's obligations
3. Assignment: Include if transfer or assignment of the guarantee rights is permitted
4. Currency Provisions: Required for cross-border guarantees involving multiple currencies
5. Tax Gross-Up: Include when payments might be subject to withholding tax
6. Multiple Guarantors: Required when there is more than one guarantor, defining their relationship
7. Amendments to Underlying Contract: Include when the guarantee needs to address potential changes to the underlying contract
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract: Copy or summary of the contract being guaranteed
3. Payment Details: Bank account and payment instruction details
4. Corporate Authorizations: Copies of relevant corporate approvals and authorizations
5. Guarantor's Conditions Precedent: List of documents required before the guarantee becomes effective
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