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The Advance Payment Guarantee Letter is a crucial financial instrument in Pakistani commercial transactions where substantial advance payments are required. It serves as a risk mitigation tool, particularly in large-scale projects or international trade dealings. The document is issued by a bank on behalf of a principal (usually a contractor or supplier) in favor of a beneficiary (typically a project owner or buyer) who has made or will make advance payments. The guarantee assures the beneficiary that their advance payment will be protected and refunded if the principal fails to perform their contractual obligations. Under Pakistani law, these guarantees must comply with the Banking Companies Ordinance 1962, State Bank of Pakistan regulations, and where applicable, Islamic banking principles. The document typically specifies the guaranteed amount, validity period, conditions for invocation, and the process for claiming payment.

1. Bank Details and Reference Number: Issuing bank's details, letter reference number, and date

2. Beneficiary Details: Full name and address of the party receiving the guarantee (typically the buyer/employer)

3. Principal Details: Full name and address of the party for whom the guarantee is being issued (typically the seller/contractor)

4. Underlying Contract Reference: Details of the main contract including reference number, date, and purpose

5. Guarantee Amount: The specific amount being guaranteed, stated in numbers and words

6. Terms of Guarantee: Core conditions of the guarantee including validity period and trigger conditions for payment

7. Payment Terms: Specific conditions and process for claiming payment under the guarantee

8. Expiry Conditions: Clear statement of when and how the guarantee expires or becomes invalid

9. Governing Law Declaration: Statement that the guarantee is governed by Pakistani law