Document background
Performance Letters of Guarantee are essential financial instruments in Dutch business transactions, particularly in large-scale projects and contracts. These documents are used when a party (typically a project owner) requires security for the performance obligations of another party (usually a contractor). A Performance Letter of Guarantee provides assurance that if the contractor fails to meet their contractual obligations, the beneficiary can claim compensation directly from the guarantor bank up to the guaranteed amount. Under Dutch law, these guarantees are governed by the Civil Code and financial regulations, making them robust instruments for risk management. They are commonly required in tender processes, construction projects, and major supply contracts, offering a balance between protecting the beneficiary's interests and facilitating business operations.
