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Contract Performance Guarantee

Contract Performance Guarantee Template for Pakistan

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Key Requirements PROMPT example:

Contract Performance Guarantee

"I need a Contract Performance Guarantee for a construction project in Lahore, Pakistan, where my company ABC Builders is the contractor, with National Bank of Pakistan as guarantor providing a 10% performance guarantee (PKR 50 million) to the Punjab Housing Authority, valid until March 15, 2025."

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Document background
The Contract Performance Guarantee is a crucial security instrument in Pakistani commercial and construction projects, required when a contractor undertakes significant project works or services. It provides financial security to project owners by ensuring that a bank or financial institution will pay a specified sum if the contractor fails to perform their contractual obligations. The guarantee, governed by Pakistani law, particularly the Contract Act 1872 and banking regulations, typically amounts to 5-10% of the contract value. It becomes effective upon issuance and remains valid throughout the contract period, often extending beyond completion to cover defect liability periods. The document is essential for risk mitigation in large-scale projects and is often a mandatory requirement in government tenders and significant commercial contracts.
Suggested Sections

1. Title and Date: Clear identification of the document as a Contract Performance Guarantee with date of issuance

2. Parties: Details of the Guarantor (Bank/Financial Institution), Principal (Contractor/Service Provider), and Beneficiary

3. Reference Information: Details of the underlying contract/tender and any reference numbers

4. Guarantee Amount: The maximum amount of the guarantee expressed in both figures and words

5. Underlying Contract: Brief description of the main contract/project for which the guarantee is being issued

6. Guarantee Terms: Core obligations of the guarantor, including conditions for payment and nature of the guarantee (unconditional, on-demand, etc.)

7. Validity Period: Clear statement of when the guarantee becomes effective and its expiry date

8. Claim Procedure: Process and requirements for making a claim under the guarantee

9. Governing Law: Specification of Pakistani law as the governing law

10. Execution Block: Signature blocks for authorized bank officials with official stamp

Optional Sections

1. Counter Guarantee: Required when the guarantee is issued through a correspondent bank or involves multiple banking parties

2. Assignment Clause: Include when the beneficiary may need the right to assign the guarantee

3. Force Majeure: Optional clause defining force majeure events and their impact on the guarantee

4. Dispute Resolution: Detailed dispute resolution mechanism, needed for high-value or complex guarantees

5. Reduction Clause: Include when the guarantee amount may be reduced in stages as the underlying contract progresses

6. Language Clause: Required when the guarantee might be used internationally or with foreign parties

7. Notice Requirements: Detailed notification procedures, recommended for complex projects or when multiple parties are involved

Suggested Schedules

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

2. Copy of Underlying Contract: Reference copy of the main contract (usually only relevant pages)

3. Bank's Authorization: Evidence of the signing authority's power to issue the guarantee

4. Performance Milestones: If the guarantee amount reduces in stages, schedule of reduction milestones

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

alex.den.21@genieai.co
Relevant legal definitions






























Clauses




















Relevant Industries

Construction

Infrastructure Development

Energy

Manufacturing

Telecommunications

Defense Contracting

Public Works

Real Estate Development

Mining

Oil and Gas

Transportation

Technology Services

Industrial Projects

Government Services

Relevant Teams

Legal

Finance

Project Management

Procurement

Risk Management

Commercial

Treasury

Operations

Compliance

Business Development

Relevant Roles

Project Manager

Contract Manager

Legal Counsel

Chief Financial Officer

Risk Manager

Commercial Director

Procurement Manager

Bank Relationship Manager

Treasury Manager

Construction Manager

Operations Director

Compliance Officer

Business Development Manager

Project Director

Finance Manager

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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Contract Performance Guarantee

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A Pakistani law-governed financial guarantee instrument where a bank ensures payment to a beneficiary if a contractor defaults on their obligations.

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