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Performance Guarantee Bonds are essential financial security instruments in the UAE business landscape, particularly in construction and large-scale projects. These bonds are required when a contractor enters into a significant contract and the client needs security for the contractor's performance. The Performance Guarantee Bond, governed by UAE law, typically amounts to 10% of the contract value and remains valid throughout the contract period plus any warranty period. It serves as a risk mitigation tool for project owners and clients, providing them with immediate access to financial compensation if the contractor fails to fulfill their contractual obligations. The document must comply with UAE Federal Laws, including Civil Code (Federal Law No. 5 of 1985) and Commercial Code (Federal Law No. 18 of 1993), as well as UAE Central Bank regulations. Banks or insurance companies issuing these bonds typically require counter-security from the contractor.

1. Identification of Parties: Details of the Guarantor (bank/insurance company), Principal (contractor), and Beneficiary (client)

2. Reference to Underlying Contract: Details of the main contract or agreement that this guarantee is securing

3. Guarantee Amount: The maximum amount of the guarantee expressed in both numbers and words

4. Scope of Guarantee: Clear description of what performance/obligations are being guaranteed

5. Duration and Validity: Effective date, expiry date, and any auto-extension conditions

6. Claim Conditions: Specific conditions under which the guarantee can be called, including notice requirements

7. Payment Terms: Timeline and method of payment upon valid claim

8. Governing Law and Jurisdiction: Explicit reference to UAE law and courts

9. Language Provision: Specification of prevailing language if document is bilingual