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The Performance Bond Guarantee is a fundamental risk management tool in South African business transactions, particularly in construction and infrastructure projects. It provides security to project owners or employers that contractors will fulfill their contractual obligations, with financial compensation available if they fail to do so. The guarantee typically covers 5-10% of the contract value and remains valid until the completion of the underlying contract or specified period thereafter. Used extensively in both private and public sector projects, it must comply with South African banking laws, financial services regulations, and specific industry requirements such as those set by the Construction Industry Development Board. The document includes detailed provisions for making claims, conditions for payment, and specific circumstances under which the guarantee can be called upon.

1. Parties: Identification of the Guarantor (usually a bank or insurance company), the Principal (the party whose performance is being guaranteed), and the Beneficiary (the party in whose favor the guarantee is issued)

2. Background: Brief context of the underlying contract or obligation that is being guaranteed, including reference to the main contract

3. Definitions: Key terms used in the guarantee, including 'Guaranteed Sum', 'Expiry Date', 'Underlying Contract', etc.

4. Guarantee: The core guarantee provision, specifying the maximum amount guaranteed and the nature of the guarantee

5. Conditions for Payment: Specific circumstances under which the guarantee can be called upon and the process for making a claim

6. Duration and Expiry: The validity period of the guarantee and conditions for extension or early termination

7. Payment Terms: The mechanics of payment, including timeline for payment upon valid demand

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

9. Governing Law and Jurisdiction: Specification of South African law as governing law and jurisdiction for disputes