Document background
The Corporate Performance Guarantee is a crucial security instrument in German commercial practice, commonly used in significant business transactions where performance risk needs to be mitigated. It is particularly relevant when a parent company or financially strong group entity guarantees the performance obligations of a subsidiary or project company. The guarantee must be drafted in compliance with German law requirements, particularly the German Civil Code (BGB) provisions on guarantees (§§ 765-778) and form requirements (§ 126). This document typically includes detailed provisions on the scope of guaranteed obligations, demand mechanisms, and payment terms, and requires careful consideration of corporate authority and enforceability issues. It is commonly used in project finance, construction contracts, and major supply agreements where the beneficiary requires additional security beyond the principal debtor's covenant.
