Document background
The Performance Letter of Guarantee is a crucial document in Danish commercial transactions where one party requires security for another's performance obligations. This instrument is commonly used in construction projects, large-scale procurements, and international trade deals where Danish law applies. The document provides financial security to the beneficiary, typically up to a specified percentage of the contract value, and can be called upon in case of the principal's default or non-performance. Subject to Danish law and banking regulations, the Performance Letter of Guarantee must contain specific elements to be legally enforceable, including clear identification of parties, precise guarantee conditions, and explicit payment terms. It serves as a risk mitigation tool, particularly important in high-value contracts where the beneficiary needs assurance of performance or compensation.
