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Performance Guarantee Agreement Template for England and Wales

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Key Requirements PROMPT example:

Performance Guarantee Agreement

"I need a Performance Guarantee Agreement where ABC Bank plc will guarantee my construction company's obligations to complete a £5 million office development project in Manchester, with the guarantee period running from 1 March 2025 to 31 December 2025."

Document background
The Performance Guarantee Agreement is essential in situations where parties require additional security for performance obligations in commercial transactions. This document, governed by English and Welsh law, provides a mechanism for guaranteeing the performance of contractual obligations and typically includes detailed provisions on the scope of the guarantee, conditions for calling on the guarantee, and the extent of the guarantor's liability. It is particularly valuable in large-scale projects, construction contracts, and significant commercial transactions where the reliability of performance is crucial. The agreement must comply with the Statute of Frauds 1677 and relevant common law principles.
Suggested Sections

1. Parties: Identification of the Guarantor, Principal Obligor, and Beneficiary

2. Background: Context of the underlying obligation and reason for guarantee

3. Definitions: Key terms used throughout the agreement

4. Guarantee and Indemnity: Core guarantee obligations and indemnity provisions

5. Scope of Guarantee: Extent and limitations of the guaranteed obligations

6. Duration: Term of the guarantee and conditions for termination

7. Demands and Payments: Process for making claims under the guarantee

8. Representations and Warranties: Guarantor's confirmations about capacity and authority

9. Governing Law and Jurisdiction: Applicable law and courts having jurisdiction

Optional Sections

1. Step-in Rights: Rights of Guarantor to take over performance in construction or project-based guarantees

2. Currency Provisions: Rules for currency conversion and payment when guarantee involves multiple currencies

3. Assignment and Transfer: Rights to assign or transfer the guarantee when parties want to allow transfer rights

4. Counter-Indemnity: Principal's obligation to indemnify guarantor when requested by guarantor

Suggested Schedules

1. Form of Demand: Template for making claims under the guarantee

2. Underlying Agreement: Copy or summary of the principal obligation being guaranteed

3. Guarantor Board Resolution: Corporate approval for providing the guarantee

4. Calculation of Guaranteed Amount: Method for calculating the guarantee amount if variable

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Relevant legal definitions






























Clauses






























Industries

Statute of Frauds 1677: Fundamental legislation requiring guarantees to be made in writing and signed to be legally enforceable

Contracts (Rights of Third Parties) Act 1999: Legislation governing how third parties may enforce terms of a contract, relevant for guarantee beneficiaries

Consumer Rights Act 2015: Key legislation protecting consumer rights, applicable if the guarantee involves a consumer party

Unfair Contract Terms Act 1977: Legislation regulating unfair terms in contracts, including limitations on exclusion clauses in guarantees

Financial Services and Markets Act 2000: Regulatory framework for financial services, relevant if the guarantee is provided by a financial institution

Common Law Contract Principles: Fundamental principles including offer, acceptance, consideration, and intention to create legal relations

Contract Construction Principles: Legal principles governing how contracts should be interpreted and construed under English law

Doctrine of Privity: Legal principle determining who can enforce contractual rights and obligations

FCA Regulations: Financial Conduct Authority regulations applicable to financial institutions providing guarantees

PRA Requirements: Prudential Regulation Authority requirements for financial institutions issuing guarantees

Rome I Regulation: EU-derived regulation determining the law applicable to contractual obligations in cross-border situations

Brussels I Regulation (recast): Regulation governing jurisdictional matters in cross-border contractual disputes

Industry-Specific Regulations: Sector-specific regulations that may apply depending on the industry context of the guarantee (construction, banking, etc.)

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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