The Advance Performance Guarantee is a critical document in Nigerian business transactions where substantial advance payments are made to contractors or suppliers. It serves as a risk mitigation tool for project owners and employers who need to make advance payments while ensuring protection against contractor default or non-performance. This guarantee is particularly important in sectors such as construction, manufacturing, and infrastructure development, where significant upfront funding is required. The document must comply with Nigerian banking regulations and contract law, typically involving a three-party arrangement between a financial institution (guarantor), a contractor (principal), and a project owner (beneficiary). The guarantee remains effective until specific project milestones are met or the advance payment is fully recovered, providing a secure framework for large-scale commercial transactions in Nigeria.
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1. Parties: Identification of the Guarantor (bank/financial institution), the Principal (contractor/supplier), and the Beneficiary (employer/buyer)
2. Background: Context of the underlying contract and purpose of the guarantee
3. Definitions: Definition of key terms used in the guarantee including 'Guaranteed Sum', 'Expiry Date', 'Underlying Contract'
4. Guarantee Amount: Specification of the maximum guaranteed sum and currency
5. Scope of Guarantee: Details of what the guarantee covers and the conditions under which it can be called
6. Duration and Validity: Term of the guarantee, including commencement and expiry dates
7. Demand Requirements: Process and requirements for making a valid demand under the guarantee
8. Payment Terms: Timing and method of payment upon valid demand
9. Reduction and Release: Conditions for reduction of guarantee amount and release of guarantor's obligations
10. Assignment and Transfer: Restrictions on assignment or transfer of rights under the guarantee
11. Governing Law and Jurisdiction: Specification of Nigerian law as governing law and jurisdiction for disputes
12. Notices: Process and requirements for serving notices under the guarantee
1. Multiple Currencies: Required when the guarantee involves multiple currencies, specifying exchange rates and conversion mechanisms
2. Counter-Indemnity: Used when the principal provides counter-indemnity to the guarantor
3. Step-In Rights: Required when the guarantor has rights to step into the underlying contract
4. Regulatory Compliance: Needed for international guarantees or when specific regulatory requirements must be met
5. Force Majeure: Optional clause dealing with events beyond parties' control affecting the guarantee
6. Language: Required when the guarantee is issued in multiple languages
7. Anti-Money Laundering Compliance: Required for high-value guarantees or when dealing with international parties
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Details: Key details of the contract being guaranteed
3. Payment Mechanism: Detailed procedures for processing payments under the guarantee
4. Required Documents: List of documents required for making a valid demand
5. Authorized Signatories: List of persons authorized to make demands or give notices under the guarantee
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