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Construction Bank Guarantee Template for New Zealand

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Key Requirements PROMPT example:

Construction Bank Guarantee

"I need a Construction Bank Guarantee for a NZD 5 million commercial building project in Auckland, where ABC Construction is the contractor and First National Bank will provide a guarantee of 10% of the contract value, with the guarantee expiring on March 15, 2025."

Document background
The Construction Bank Guarantee is a fundamental security instrument in New Zealand's construction industry, designed to protect project owners against contractor default or non-performance. This document becomes necessary when a project owner requires financial security for a construction project, typically during the tender process or as a condition precedent to contract execution. The guarantee amount usually ranges from 5% to 10% of the construction contract value, though this can vary based on project specifics. Under New Zealand law, particularly the Construction Contracts Act 2002 and banking regulations, the guarantee provides a mechanism for immediate payment upon valid demand, without requiring proof of default. The document includes specific details about the underlying construction contract, parties involved, guaranteed sum, validity period, and claim procedures. It serves as an unconditional undertaking by the bank to pay the specified sum upon demand, subject to the terms and conditions outlined in the guarantee.
Suggested Sections

1. Parties: Identifies the three key parties: the Bank (Guarantor), the Contractor (Principal), and the Project Owner (Beneficiary)

2. Background: Outlines the underlying construction contract details and the requirement for the bank guarantee

3. Definitions: Defines key terms used in the guarantee including 'Guaranteed Sum', 'Expiry Date', 'Demand', and 'Construction Contract'

4. Guarantee and Undertaking: The bank's primary obligation to pay the guaranteed sum upon valid demand

5. Maximum Liability: States the maximum amount of the bank's liability under the guarantee

6. Conditions for Payment: Specifies the conditions and process for making a valid demand under the guarantee

7. Term and Expiry: Details when the guarantee becomes effective and when it expires

8. Reduction and Release: Conditions under which the guaranteed amount may be reduced and when the guarantee will be released

9. Assignment: Provisions regarding whether the guarantee can be assigned by any party

10. Governing Law and Jurisdiction: Specifies that New Zealand law governs the guarantee and determines jurisdiction for disputes

Optional Sections

1. Multiple Beneficiaries: Required when there are multiple project owners or beneficiaries, detailing how the guarantee operates in such circumstances

2. Step-down Provisions: Optional section for when the guarantee amount reduces in stages aligned with construction milestones

3. Counter-Indemnity: Sometimes included when the bank requires specific indemnity from the contractor beyond standard terms

4. Electronic Presentation: Required when demands can be made electronically, specifying the process and requirements

5. Currency Provisions: Needed when the guarantee amount is in a currency other than New Zealand dollars

Suggested Schedules

1. Schedule 1 - Form of Demand: Template for making a valid demand under the guarantee

2. Schedule 2 - Construction Contract Details: Key details of the underlying construction contract including project description, contract number, and dates

3. Schedule 3 - Bank Contact Details: Specific contact information and procedures for submitting demands or communications

4. Appendix A - Step-down Schedule: If applicable, details the schedule of guarantee amount reductions linked to project milestones

5. Appendix B - Special Conditions: Any special or additional conditions specific to the particular guarantee or project

Authors

Alex Denne

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

Relevant legal definitions






























Clauses



























Relevant Industries

Construction

Infrastructure

Real Estate Development

Banking and Financial Services

Public Works

Commercial Property

Residential Development

Industrial Construction

Engineering

Government and Public Sector

Relevant Teams

Legal

Finance

Commercial

Project Management

Risk and Compliance

Construction

Procurement

Contract Administration

Business Development

Treasury

Relevant Roles

Project Manager

Construction Manager

Contract Administrator

Financial Controller

Bank Manager

Legal Counsel

Commercial Director

Risk Manager

Development Manager

Quantity Surveyor

Chief Financial Officer

Project Director

Construction Director

Procurement Manager

Company Secretary

Industries






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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