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The Performance Bank Guarantee is a crucial financial instrument in Philippine commercial transactions, particularly used in construction, infrastructure, and major commercial projects. It provides security to project owners and government entities by ensuring that contractors or suppliers will fulfill their contractual obligations. The guarantee, issued by a bank regulated under Philippine law and BSP guidelines, typically covers a percentage of the contract value and remains valid throughout the project duration. When drafting a Performance Bank Guarantee, consideration must be given to Philippine banking regulations, the Civil Code, and specific BSP circulars governing such instruments. The document should clearly outline the guarantee amount, validity period, conditions for calling on the guarantee, and payment terms, while ensuring compliance with local banking practices and regulatory requirements.

1. Parties: Identifies the three key parties: (1) the Bank as Guarantor, (2) the Principal (party whose performance is being guaranteed), and (3) the Beneficiary

2. Background: References the underlying contract or obligation that is being guaranteed and explains the requirement for this guarantee

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

4. Guarantee and Maximum Liability: States the bank's unconditional guarantee and specifies the maximum amount payable under the guarantee

5. Term and Validity: Specifies the effective date and expiry date of the guarantee

6. Demand Requirements: Details the procedure and requirements for making a valid demand under the guarantee

7. Payment Terms: Specifies the timeline and method for payment upon receipt of a valid demand

8. Bank's Rights and Obligations: Outlines the bank's rights, including right to investigate claims, and its core obligations

9. Reduction and Release: Describes circumstances under which the guaranteed amount may be reduced and when the bank will be released from its obligations

10. Governing Law and Jurisdiction: Specifies that Philippine law governs and designates jurisdiction for disputes