Performance Guarantee Format

A performance guarantee, also known as a bank guarantee, is a type of financial instrument that ensures the fulfillment of contractual obligations between two parties. In international trade, it is commonly used as a means of security to protect the interests of both buyers and sellers.

When issuing a performance guarantee, banks typically follow a specific format to ensure clarity and enforceability. Below is an example of a standard format for a performance guarantee:

[Bank's Letterhead]
[Bank's Name and Address]
[Date]

To: [Beneficiary's Name and Address]

Dear Sir/Madam,

RE: PERFORMANCE GUARANTEE NO: [Enter Guarantee Number]

1. We hereby confirm and undertake to pay you on demand without any objection or delay, up to the amount of [Enter Amount in Words and Currency], being the maximum aggregate liability under this performance guarantee, upon receipt by our bank of your written demand accompanied by your statement confirming the default by the party liable under the underlying contract.

2. This performance guarantee is valid until [Enter Validity Date], unless otherwise agreed upon by both parties involved.

3. Any demand made under this guarantee should be presented to us in writing at the above address, together with all necessary supporting documents outlining the nature of the default.

4. The payment under this guarantee shall be made in [Enter Currency] and shall be credited to your designated bank account within [Enter Number of Days] working days from the date of receipt of your demand.

5. Our liability under this guarantee shall in no way be affected or reduced by any dispute or disagreement arising from the aforementioned underlying contract.

6. It is understood that any amendment or modification to the terms of the underlying contract shall not affect this guarantee unless otherwise agreed upon in writing by all parties involved.

7. This guarantee is subject to the laws and regulations of [Enter Applicable Jurisdiction] and the jurisdiction of the courts in [Enter Jurisdiction] shall have exclusive jurisdiction over any disputes arising out of or in connection with this guarantee.

Yours faithfully,

[Bank's Authorized Signatory]

[Name and Designation]

[Bank's Name]

Issued By:

[Issuing Bank's Stamp and Signature]

Please note that the above format is just an example and may be subject to variations based on specific requirements and circumstances. It is always advisable to consult a legal professional or banking expert for guidance before issuing or receiving a performance guarantee.