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The Payment And Performance Guarantee is a crucial financial and legal instrument widely used in Malaysian commercial transactions, particularly in construction, infrastructure, and development projects. This document becomes necessary when a party requires security for both payment obligations and performance commitments from another party. It combines elements of traditional bank guarantees with performance bonds, providing comprehensive protection against both payment defaults and performance failures. The guarantee is structured to comply with Malaysian legal requirements, including the Contracts Act 1950 and relevant banking regulations, and can be issued by either financial institutions or corporate entities. It typically specifies a maximum liability amount, validity period, and precise conditions for claims, while also detailing the scope of guaranteed obligations and claim procedures. This type of guarantee is particularly important in large-scale projects where both financial security and performance assurance are critical.

1. Parties: Identifies the Guarantor, Principal (the party whose obligations are being guaranteed), and Beneficiary

2. Background: Describes the underlying transaction or agreement that necessitates the guarantee

3. Definitions: Defines key terms used throughout the guarantee document

4. Guarantee and Indemnity: The core section establishing the guarantee obligations, including both payment and performance aspects

5. Scope of Guarantee: Detailed description of what obligations are covered by the guarantee

6. Maximum Liability: Specifies the maximum amount for which the guarantor can be held liable

7. Duration and Validity: Specifies the commencement date and expiry date of the guarantee

8. Demand Requirements: Procedures and conditions for making a claim under the guarantee

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

10. Guarantor's Obligations: Detailed listing of the guarantor's responsibilities and commitments

11. Non-discharge Clause: Circumstances that do not discharge the guarantor from obligations

12. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and jurisdiction for disputes