The Advance Performance Guarantee is a critical document in Philippine commercial transactions, particularly in large-scale projects where substantial advance payments are involved. This guarantee instrument, governed by Philippine banking regulations and the Civil Code, provides financial security to project owners or employers who make advance payments to contractors or service providers. The document is typically required before the release of advance payments and remains active until the advanced amount is fully amortized or the contracted works are completed. The guarantee ensures that if the contractor fails to properly utilize the advance payment or defaults on their obligations, the beneficiary can recover the outstanding advance payment amount from the guarantor. Common in construction, infrastructure, and major procurement contracts, the Advance Performance Guarantee must comply with specific requirements set by the Bangko Sentral ng Pilipinas (BSP) and other relevant Philippine regulatory authorities.
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1. Parties: Identification of the Guarantor (typically a bank or financial institution), the Principal (party whose performance is being guaranteed), and the Beneficiary
2. Background: Context of the underlying contract or obligation for which the guarantee is being provided
3. Definitions: Key terms used throughout the guarantee document, including 'Guaranteed Sum', 'Underlying Contract', 'Demand Notice', etc.
4. Guarantee: Core section detailing the specific guarantee commitment, amount, and scope of the guarantee
5. Conditions for Payment: Specific circumstances and requirements under which the guarantee can be called upon
6. Demand Procedure: Process and formalities for making a valid demand under the guarantee
7. Duration and Expiry: Term of the guarantee, including start date, expiry date, and any automatic extension provisions
8. Reduction and Release: Circumstances and process for reducing the guarantee amount or releasing the guarantee
9. Representations and Warranties: Standard declarations by the guarantor regarding authority and capacity to issue the guarantee
10. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction for disputes
1. Counter-Indemnity: Optional section when the Principal provides counter-indemnity to the Guarantor - typically included in bank-issued guarantees
2. Assignment: Include when transfer or assignment of guarantee rights needs to be addressed
3. Multiple Beneficiaries: Required when there is more than one beneficiary of the guarantee
4. Step-In Rights: Include when the guarantor has the right to take over the underlying contract upon default
5. Currency Provisions: Required when the guarantee involves foreign currency or multiple currencies
6. Tax Provisions: Include when specific tax implications need to be addressed, particularly for cross-border guarantees
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Details: Summary or extract of the main contract being guaranteed
3. Payment Schedule: If applicable, schedule of guaranteed payments or performance milestones
4. Authorized Signatories: List of persons authorized to make demands under the guarantee
5. Bank Details: Banking information for payment processing
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