Document background
The Irrevocable Letter of Guarantee is a fundamental financial instrument in Dutch commercial practice, designed to provide security and risk mitigation in business transactions. It is particularly crucial in scenarios where parties seek absolute assurance of payment or performance, such as in international trade, construction projects, or large commercial contracts. The document, governed by Dutch law and regulated under the Burgerlijk Wetboek, establishes a three-party relationship between the Guarantor (typically a bank), the Principal (the party requesting the guarantee), and the Beneficiary. When drafting an Irrevocable Letter of Guarantee, specific attention must be paid to Dutch banking regulations, financial supervision laws, and international banking practices, especially when the guarantee involves cross-border transactions.
