The Contract Performance Guarantee is a crucial security instrument in New Zealand's commercial and construction sectors, designed to protect project owners and employers against contractor default or non-performance. This document becomes necessary when significant contracts require performance security, particularly in large-scale construction, infrastructure, or development projects. The guarantee provides financial assurance up to a specified percentage (typically 5-10%) of the contract value. Under New Zealand law, the Contract Performance Guarantee must comply with local banking regulations and contract law principles, including the Contract and Commercial Law Act 2017. It should clearly define trigger events, claim procedures, and the extent of guarantor liability. The document is commonly required in tender processes, public sector contracts, and major private developments where project completion assurance is essential.
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1. Parties: Identifies the Guarantor, the Beneficiary (typically the employer/principal), and the Contractor whose performance is being guaranteed
2. Background: Context of the guarantee, including reference to the main contract and the reason for the guarantee
3. Definitions: Defines key terms used throughout the guarantee, including 'Guaranteed Obligations', 'Main Contract', and 'Guarantee Amount'
4. Guarantee and Indemnity: Core section stating the guarantee obligations, including the maximum guarantee amount and scope of coverage
5. Duration of Guarantee: Specifies the effective period of the guarantee, including commencement and expiry dates
6. Claims Procedure: Details the process for making claims under the guarantee, including notice requirements and response timeframes
7. Payment Obligations: Specifies how and when payments must be made following a valid claim
8. Discharge and Release: Conditions under which the guarantor will be released from obligations
9. Assignment and Transfer: Restrictions or permissions regarding the transfer of rights under the guarantee
10. Governing Law and Jurisdiction: Specifies New Zealand law as governing law and determines jurisdiction for disputes
11. Notices: Details how formal communications between parties should be made and delivered
12. Execution: Signature blocks and execution requirements for all parties
1. Multiple Guarantors: Required when there is more than one guarantor, addressing joint and several liability
2. Counter-Indemnity: Used when the contractor provides indemnity to the guarantor
3. Step-In Rights: Optional provisions allowing the guarantor to step in and complete the contract upon contractor default
4. Security: Required when additional security is provided to support the guarantee
5. Demand Restrictions: Optional limitations on when and how demands can be made under the guarantee
6. Foreign Law Compliance: Required when parties are from different jurisdictions or when international operations are involved
7. Costs and Expenses: Optional section detailing responsibility for costs related to preparation, enforcement, or amendments
1. Schedule 1 - Main Contract Details: Copy or summary of the main contract being guaranteed
2. Schedule 2 - Guaranteed Obligations: Detailed description of the specific obligations covered by the guarantee
3. Schedule 3 - Form of Demand: Template for making claims under the guarantee
4. Schedule 4 - Performance Standards: Specific performance criteria that trigger the guarantee
5. Appendix A - Financial Capacity Statement: Evidence of the guarantor's financial capacity to meet guarantee obligations
6. Appendix B - Authorization Documents: Corporate authorizations and powers of attorney if required
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