The Performance Security Bank Guarantee is a crucial financial instrument in Philippine commercial transactions, particularly in construction, infrastructure, and government contracts. It serves as a risk mitigation tool where a bank guarantees the performance obligations of a contractor or supplier to the project owner. This document becomes necessary when a principal contract requires performance security, typically ranging from 5% to 10% of the contract value. The guarantee must comply with Philippine banking regulations, particularly those set by the Bangko Sentral ng Pilipinas (BSP), and follows specific formatting and content requirements established by Philippine commercial practice. It's commonly used in public procurement, large-scale private projects, and international contracts where Philippine entities are involved, providing beneficiaries with readily accessible financial security in case of contractor default.
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1. Bank Details and Reference Number: Letterhead and unique reference number of the guaranteeing bank
2. Date: Date of issuance of the guarantee
3. Beneficiary Details: Full name and address of the party receiving the guarantee
4. Project Reference: Clear identification of the underlying project or contract being guaranteed
5. Guarantee Amount: The maximum amount of the guarantee expressed in both figures and words
6. Principal Obligation: Description of the primary contract or obligation being secured
7. Guarantee Terms: Specific conditions under which the guarantee becomes payable
8. Duration and Validity: Clear statement of the guarantee's effective date and expiry date
9. Demand Requirements: Procedure and requirements for making a claim under the guarantee
10. Governing Law and Jurisdiction: Specification of Philippine law as governing law and jurisdiction
11. Authorized Signatures: Space for bank officials' signatures with their names and designations
1. Counter-Guarantee Reference: Required when the guarantee is issued based on a counter-guarantee from another bank
2. Assignment Clause: Include when the beneficiary needs the right to assign the guarantee
3. Reduction Clause: Include when the guarantee amount can be progressively reduced based on project milestones
4. Force Majeure Provisions: Include when specific force majeure events need to be addressed
5. Language Declaration: Required when the guarantee might be used internationally or when dual language versions exist
1. Form of Demand: Template for making a valid demand under the guarantee
2. Copy of Underlying Contract: Referenced but usually attached only if specifically required
3. Schedule of Authorized Signatories: List of persons authorized to make demands under the guarantee
4. Reduction Schedule: If applicable, schedule showing the progressive reduction of the guarantee amount
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