On Demand Bank Guarantee Template for Germany

The On Demand Bank Guarantee is a fundamental financial instrument used to secure commercial obligations under German law. It is commonly employed in construction projects, international trade transactions, and tender submissions where one party requires security for the performance of contractual obligations. The document creates an independent, unconditional obligation by the bank to pay upon receiving a compliant demand, without needing to prove default. Used extensively in cross-border transactions, it provides beneficiaries with a reliable, quickly accessible form of security, while principals can fulfill their contractual requirements without tying up significant cash resources. The guarantee must comply with German banking regulations, the Civil Code (BGB), and often incorporates international banking practices such as the ICC's URDG rules.

1. Parties: Identification of the Bank (Guarantor), the Beneficiary, and the Principal (the party on whose behalf the guarantee is issued)

2. Background: Brief context of the underlying transaction or relationship necessitating the guarantee

3. Definitions: Key terms used in the guarantee, including 'Demand', 'Guarantee Amount', and 'Expiry Date'

4. Guarantee: Core section stating the unconditional guarantee commitment and maximum guarantee amount

5. Demand Procedure: Specific requirements and process for making a valid demand under the guarantee

6. Payment Terms: Timeline and method for payment upon receipt of a valid demand

7. Expiry: Terms regarding the expiry of the guarantee and conditions for extension

8. Reduction Clause: Provisions for how the guarantee amount may be reduced over time

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

10. Notices: Format and addresses for all formal communications under the guarantee