Title: Guidelines for External Performance Guarantees

Introduction:

An external performance guarantee is a legal document issued by a financial institution to ensure the performance of a contractual obligation made by one party to another in an international business transaction. It provides assurance to the beneficiary that the obligations of the applicant will be fulfilled as stated in the contract. In this article, we will discuss the standard format and key components of an external performance guarantee letter.

Structure:

The format of an external performance guarantee letter typically follows the below structure:

1. Heading:

The heading of the letter should clearly state that it is an "External Performance Guarantee" and include the date of issuance, name and address of the issuing bank, and the beneficiary.

2. Applicant Details:

This section includes the name, address, and contact details of the applicant (the party who is entering into the contractual obligation).

3. Beneficiary Details:

The beneficiary's name, address, and contact details should be clearly stated, along with any specific instructions for presenting the guarantee.

4. Contractual Obligations:

The guarantee should explicitly state the obligations that the applicant has agreed to perform under the contract, such as providing goods or services, making payments, or meeting certain project milestones.

5. Guarantee Amount:

The guarantee amount, which represents the maximum liability of the issuing bank, should be clearly mentioned and stated both in figures and words.

6. Validity Period:

The duration of the guarantee should be clearly specified, including the start and end dates.

7. Terms and Conditions:

This section outlines the terms and conditions that govern the guarantee, such as claims process, amendments, governing law, and jurisdiction.

8. Signatures:

The guarantee must be signed by an authorized representative of the issuing bank, along with their name, title, and contact details.

Conclusion:

When issuing an external performance guarantee, it is essential to ensure that the letter adheres to the standard format and includes all necessary information. Clear communication of obligations, guarantee amount, and validity period will help establish a solid understanding between the parties involved. Always consult with legal professionals and banking experts to ensure compliance with applicable laws and regulations.