A Performance Guarantee Bond is a crucial security instrument in Belgian commercial and construction practice, typically required for significant projects or contracts where performance assurance is essential. This document serves as a financial guarantee issued by a bank or financial institution to secure the performance obligations of a contractor or supplier. Under Belgian law, the bond provides the beneficiary with direct recourse to the guaranteed amount without first having to pursue the principal debtor, following the principle of 'first demand guarantee'. The document specifies the guaranteed amount (usually a percentage of the contract value), validity period, conditions for calling the guarantee, and release mechanisms. It's particularly important in public procurement, construction projects, and major commercial contracts where Belgian law requires performance security.
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1. Parties: Identification of the Guarantor (typically a bank or financial institution), the Beneficiary (party receiving the guarantee), and the Principal (party whose performance is being guaranteed)
2. Background: Context of the guarantee, including reference to the underlying contract or obligation being guaranteed
3. Definitions: Definitions of key terms used throughout the guarantee bond
4. Guarantee: Core guarantee commitment, including the maximum guaranteed amount and the nature of the guaranteed obligations
5. Duration: Validity period of the guarantee, including commencement and expiry dates
6. Demand Requirements: Formal requirements and procedures for making a claim under the guarantee
7. Payment Terms: Timeframe and method for payment upon valid demand
8. Reduction and Release: Conditions under which the guaranteed amount may be reduced and when the guarantee will be released
9. Governing Law and Jurisdiction: Confirmation of Belgian law as governing law and jurisdiction for disputes
10. Notices: Format and delivery requirements for all formal communications under the guarantee
1. Transfer and Assignment: Include when the guarantee needs to be transferable or when assignment rights need to be specifically addressed
2. Counter-Indemnity: Include when there is a separate counter-indemnity arrangement between the Guarantor and the Principal
3. Multiple Beneficiaries: Include when there are multiple beneficiaries and their rights need to be clearly defined
4. Partial Claims: Include when partial claims under the guarantee need to be specifically permitted and regulated
5. Language: Include when the guarantee is issued in multiple languages to specify which version prevails
6. Tax Provisions: Include when specific tax implications need to be addressed or allocated between parties
7. Force Majeure: Include when force majeure events need to be specifically addressed in relation to the guarantee obligations
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract: Copy or key excerpts of the contract or obligation being guaranteed
3. Authorization Documents: Corporate authorizations and powers of attorney evidencing authority to issue the guarantee
4. Specimen Signatures: Authenticated specimen signatures of authorized signatories for making demands
5. Release Form: Template for the formal release of the guarantee upon completion or expiry
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