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Performance Bond Agreement

Performance Bond Agreement Template for United Arab Emirates

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Key Requirements PROMPT example:

Performance Bond Agreement

"I need a Performance Bond Agreement for a UAE construction project worth AED 50 million, where Emirates NBD will issue a performance bond amounting to 10% of the project value to guarantee our company's obligations for a new shopping mall development in Dubai, with the bond validity from January 2025 to December 2025."

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Document background
A Performance Bond Agreement is a crucial security instrument in the UAE business landscape, particularly for construction, infrastructure, and major commercial projects. This document is required when a project owner (beneficiary) needs financial security against a contractor's potential failure to perform their contractual obligations. The agreement, governed by UAE law and banking regulations, typically amounts to 10-20% of the contract value and remains valid throughout the project duration plus any warranty period. It establishes the mechanism for making claims, conditions for bond reduction or release, and specific requirements for demand validity. The document must comply with UAE Civil Code, Commercial Transactions Law, and Central Bank regulations, making it essential to have proper legal and financial review before execution.
Suggested Sections

1. Parties: Identifies the principal parties: the Bond Issuer (typically a bank), the Contractor (Principal), and the Beneficiary (typically the project owner)

2. Background: Context of the underlying contract or project for which the performance bond is being issued

3. Definitions: Key terms used throughout the agreement including Bond Amount, Expiry Date, Underlying Contract, etc.

4. Bond Amount and Scope: Specifies the guaranteed amount and the scope of the performance guarantee

5. Term and Validity: Duration of the bond, including commencement and expiry dates

6. Conditions for Calling the Bond: Specific circumstances under which the beneficiary can make a demand under the bond

7. Demand Procedure: Process and requirements for making a valid demand under the bond

8. Payment Terms: Timeframe and method for payment upon valid demand

9. Reduction and Release: Conditions for reduction of bond amount and final release

10. Governing Law and Jurisdiction: Specifies UAE law as governing law and relevant courts' jurisdiction

11. Notices: Communication procedures between parties

12. Execution: Signature blocks and execution formalities

Optional Sections

1. Counter Guarantee: Required when there's a separate counter-guarantee arrangement between the contractor and the bond issuer

2. Assignment: Include when transfer rights need to be specifically addressed

3. Language: Required when dual language versions are needed, specifying which version prevails

4. Step-In Rights: Include for complex projects where the beneficiary may need rights to step in and complete works

5. Dispute Resolution: Alternative dispute resolution mechanisms if parties prefer arbitration over court proceedings

6. Force Majeure: Include when specific force majeure provisions are required beyond standard UAE law provisions

7. Amendments: Include when specific procedures for amendments need to be detailed

Suggested Schedules

1. Form of Demand: Template for making a valid demand under the bond

2. Underlying Contract Details: Key details of the contract being guaranteed, including scope and value

3. Project Details: Specific details of the project related to the performance bond

4. Authorization Documents: Corporate authorizations and powers of attorney

5. Bond Reduction Schedule: If applicable, schedule of planned reductions in bond amount

6. Special Conditions: Any special conditions or requirements specific to the project or parties

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Applicable Law
Authorized Representative
Bank
Beneficiary
Bond Amount
Bond Expiry Date
Business Day
Claim
Completion Certificate
Contractor
Default
Demand Notice
Effective Date
Event of Default
Force Majeure
Guarantee
Guaranteed Obligations
Initial Expiry Date
Letter of Award
Liability Period
Maximum Liability Amount
Notice
Obligor
Parent Company
Parties
Performance Bond
Principal
Project
Project Documents
Related Parties
Relevant Jurisdiction
Security
Substantial Completion
Term
Underlying Contract
UAE
Valid Claim
Warranty Period
Working Days
Clauses
Interpretation
Definitions
Bond Issuance
Bond Amount
Duration and Validity
Demand Requirements
Payment Obligations
Representations and Warranties
Assignment and Transfer
Amendments
Notices
Confidentiality
Force Majeure
Dispute Resolution
Governing Law
Jurisdiction
Severability
Entire Agreement
Counterparts
Language
Bond Reduction
Release Terms
Default Events
Claim Procedures
Bank's Rights and Obligations
Beneficiary's Rights and Obligations
Principal's Obligations
Termination
Indemnification
Costs and Expenses
Waiver
Time Limits
Electronic Communications
Authority and Capacity
Relevant Industries

Construction

Infrastructure Development

Real Estate

Oil & Gas

Energy

Manufacturing

Technology Implementation

Defense Contracting

Government Projects

Transportation

Healthcare Infrastructure

Education Infrastructure

Relevant Teams

Legal

Finance

Commercial

Risk Management

Treasury

Procurement

Operations

Compliance

Project Management

Business Development

Relevant Roles

Project Manager

Contract Manager

Legal Counsel

Finance Director

Commercial Director

Risk Manager

Treasury Manager

Chief Financial Officer

Construction Manager

Procurement Manager

Company Secretary

Compliance Officer

Business Development Director

Operations Director

Industries
UAE Civil Code (Federal Law No. 5 of 1985): Fundamental law governing contracts, obligations, and securities in the UAE, including provisions for guarantees and bonds
UAE Commercial Transactions Law (Federal Law No. 18 of 1993): Regulates commercial transactions including banking operations, commercial papers, and securities
UAE Banking Law (Federal Law No. 14 of 2018): Governs banking activities including the issuance of guarantees and bonds by financial institutions
UAE Commercial Companies Law (Federal Law No. 2 of 2015): Relevant for corporate authority to issue or receive performance bonds and related corporate guarantees
Central Bank Regulations on Guarantees: Specific regulations issued by the UAE Central Bank governing the issuance and execution of bank guarantees including performance bonds
UAE Federal Law No. 6 of 2018 on Arbitration: Important for dispute resolution clauses in performance bonds, especially for construction and commercial projects
UAE Federal Law No. 11 of 1992 (Civil Procedure Law): Governs the enforcement procedures and mechanisms for performance bonds in case of defaults
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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