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Advance Payment Guarantee Bond

Advance Payment Guarantee Bond Template for New Zealand

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Key Requirements PROMPT example:

Advance Payment Guarantee Bond

"I need an Advance Payment Guarantee Bond for a NZD 5 million construction project in Auckland, where the guarantee amount reduces by 25% every three months starting March 2025, with ANZ Bank as guarantor and requiring counter-indemnity provisions."

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Document background
The Advance Payment Guarantee Bond is a crucial financial instrument in New Zealand commercial practice, particularly used in situations where one party requires security for substantial advance payments made to another party. This document is essential in projects or contracts where upfront funding is necessary for mobilization, purchase of materials, or project initiation. The guarantee provides assurance that the advance payment will be returned if the receiving party fails to perform their obligations. Governed by New Zealand law, including the Contract and Commercial Law Act 2017 and Financial Markets Conduct Act 2013, the bond typically specifies the guaranteed amount, validity period, conditions for demand, and payment terms. It's commonly used in construction, infrastructure projects, and international trade, providing a balanced mechanism for protecting the interests of both the paying party and the party receiving the advance payment.
Suggested Sections

1. Parties: Identifies the Guarantor (bank/insurance company), the Beneficiary (party making advance payment), and the Principal (party receiving advance payment)

2. Background: Describes the underlying contract between Principal and Beneficiary, and the purpose of the advance payment

3. Definitions: Defines key terms used in the guarantee including Guaranteed Sum, Expiry Date, and Underlying Contract

4. Guarantee and Undertaking: Core guarantee provision where Guarantor undertakes to pay the Guaranteed Sum upon demand

5. Amount of Guarantee: Specifies the maximum guaranteed amount and any reduction mechanisms

6. Demand Requirements: Sets out the form and content requirements for making a valid demand under the guarantee

7. Duration and Expiry: Specifies the effective period of the guarantee and conditions for expiry

8. Payment Terms: Details the timing and method of payment upon receipt of a valid demand

9. Governing Law and Jurisdiction: Specifies New Zealand law as governing law and sets jurisdiction for disputes

Optional Sections

1. Assignment: Include when the guarantee needs to be transferable to another beneficiary

2. Counter-Indemnity: Include when Principal must provide indemnity to Guarantor

3. Reduction Mechanism: Include when the guarantee amount reduces progressively based on contract milestones

4. Multiple Beneficiaries: Include when there are multiple parties entitled to make demands under the guarantee

5. Language: Include when the guarantee may be used internationally and language requirements need specification

6. Force Majeure: Include when specific events that might affect the guarantee's operation need to be addressed

Suggested Schedules

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

2. Underlying Contract Details: Key details of the contract for which advance payment is being guaranteed

3. Reduction Schedule: If applicable, schedule showing how guarantee amount reduces over time

4. Authentication Procedure: Procedures for verifying authenticity of demands and communications

5. Contact Details: Contact information for all parties for notices and demands

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 Industries

Construction

Infrastructure

Manufacturing

Engineering

Energy

Mining

International Trade

Technology

Telecommunications

Defense

Relevant Teams

Legal

Finance

Procurement

Commercial

Treasury

Risk Management

Operations

Project Management

Contract Administration

Business Development

Relevant Roles

Chief Financial Officer

Finance Director

Project Manager

Contract Manager

Legal Counsel

Commercial Director

Treasury Manager

Risk Manager

Procurement Manager

Business Development Manager

Operations Director

Company Secretary

Industries
Contract and Commercial Law Act 2017: Primary legislation governing formation and enforcement of contracts in New Zealand, including electronic transactions and contractual remedies
Property Law Act 2007: Governs property law matters including security interests and enforcement of securities
Personal Property Securities Act 1999: Regulates security interests in personal property, including guarantees and other financial instruments
Financial Markets Conduct Act 2013: Regulates financial products and services, including requirements for financial instruments and guarantees
Construction Contracts Act 2002: Relevant if the advance payment guarantee relates to construction contracts, as it regulates payment protections in construction projects
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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