The Financial Guarantee And Performance Guarantee is a crucial document in South African commercial transactions where both financial security and performance assurance are required. It is commonly used in construction projects, infrastructure development, and large commercial contracts where a beneficiary needs protection against both financial default and performance failure of a contractor or service provider. The document combines elements of traditional bank guarantees with performance bonds, structured in accordance with South African banking regulations, the Financial Sector Regulation Act, and common law principles. It provides mechanisms for calling on the guarantee in cases of both financial default and performance deficiency, while including specific provisions for claim procedures, performance standards, and compliance with local regulatory requirements. This type of guarantee is particularly valuable in complex projects where both monetary and performance obligations need to be secured under a single instrument.
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1. Parties: Identification of the Guarantor, Principal Debtor/Contractor, and Beneficiary
2. Background: Context of the underlying transaction and reason for the guarantee
3. Definitions: Definitions of key terms used throughout the guarantee
4. Guarantee Amount: Specification of the maximum guaranteed sum and currency
5. Scope of Guarantee: Detailed description of the obligations being guaranteed, both financial and performance-related
6. Duration and Validity: Term of the guarantee, including commencement and expiry dates
7. Conditions for Payment: Circumstances under which the guarantee can be called upon and payment procedures
8. Claim Procedures: Process and requirements for making a claim under the guarantee
9. Performance Standards: Specific performance criteria and standards that must be met
10. Reduction and Release: Conditions under which the guarantee amount may be reduced or the guarantee released
11. Assignment and Transfer: Restrictions on assignment or transfer of rights under the guarantee
12. Governing Law and Jurisdiction: Specification of South African law as governing law and jurisdiction for disputes
13. Notices: Communication procedures and contact details for all parties
14. Execution: Signature blocks and execution requirements
1. Counter-Indemnity: Required when the Principal Debtor must indemnify the Guarantor
2. Step-In Rights: Include when the Guarantor has the right to take over performance obligations
3. Multiple Guarantors: Required when there is more than one guarantor, defining joint and several liability
4. Currency Provisions: Include for cross-border transactions involving multiple currencies
5. Tax Provisions: Required when tax implications need specific addressing
6. Force Majeure: Include when performance obligations may be affected by force majeure events
7. Dispute Resolution: Alternative dispute resolution procedures if preferred over court jurisdiction
8. Compliance Requirements: Include specific regulatory compliance obligations where relevant
1. Schedule A - Underlying Agreement: Details of the principal agreement being guaranteed
2. Schedule B - Performance Criteria: Detailed technical specifications and performance standards
3. Schedule C - Claim Forms: Standard forms and documents required for making claims
4. Schedule D - Payment Schedule: Timeline and structure of any scheduled guarantee reductions
5. Schedule E - Contact Details: Comprehensive contact information for all parties
6. Appendix 1 - Supporting Documents: Copies of relevant certificates, licenses, or other supporting documentation
7. Appendix 2 - Compliance Certificates: Forms for periodic compliance certification if required
Authors
Relevant legal definitions
Clauses
Relevant Industries
Construction
Infrastructure Development
Mining
Energy
Real Estate Development
Manufacturing
Engineering
Public Sector
Telecommunications
Transport and Logistics
Financial Services
Project Finance
Relevant Teams
Legal
Finance
Treasury
Risk Management
Operations
Commercial
Procurement
Compliance
Project Management
Contract Administration
Relevant Roles
Chief Financial Officer
Project Manager
Contract Manager
Legal Counsel
Risk Manager
Treasury Manager
Commercial Director
Construction Manager
Procurement Manager
Financial Director
Company Secretary
Compliance Officer
Project Finance Manager
Operations Director
Bank Relationship Manager
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