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Performance SBLC for the United States

Performance SBLC Template for United States

A Performance Standby Letter of Credit (SBLC) is a financial instrument issued by a bank that guarantees the performance obligations of a contractor or service provider. Under U.S. law, particularly UCC Article 5, it serves as an independent undertaking by the issuing bank to pay a specified amount to the beneficiary if the applicant fails to meet their contractual performance obligations. The document provides security to the beneficiary while allowing the applicant to demonstrate financial capability without immediate cash outlay.

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Performance SBLC

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What is a Performance SBLC?

The Performance SBLC is a crucial financial instrument in commercial transactions where parties seek security for performance obligations. It evolved from the need to provide reliable, bank-backed guarantees in complex commercial transactions. Under U.S. jurisdiction, these instruments are primarily governed by UCC Article 5 and international banking practices (ISP98). The Performance SBLC typically includes specific details about the underlying transaction, performance obligations, conditions for drawing, and expiry terms. It's particularly valuable in international trade and large-scale projects where parties may not have established business relationships or where significant performance risks exist.

What sections should be included in a Performance SBLC?

1. Issuing Bank Details: Complete identification and contact information of the issuing bank, including SWIFT codes and authentication details

2. Beneficiary Information: Full details of the party in whose favor the SBLC is issued, including legal name, address, and contact information

3. Applicant Information: Details of the party requesting the SBLC, including legal name, address, and contact information

4. SBLC Amount and Currency: Specified amount and currency of the guarantee, including any provisions for adjustment

5. Validity Period: Clear statement of the SBLC effective date, validity period and expiration date

6. Performance Obligations: Detailed description of the underlying performance obligations being guaranteed under the SBLC

7. Drawing Conditions: Precise conditions and documentation requirements under which the SBLC can be drawn upon

What sections are optional to include in a Performance SBLC?

1. Transferability Clause: Optional provisions specifying whether and under what conditions the SBLC may be transferred to other beneficiaries

2. Partial Drawing Provisions: Optional specifications for allowing and handling partial draws against the SBLC

3. Automatic Extension Clause: Optional provisions for automatic extension of the SBLC, including conditions and notice requirements

4. Governing Law and Jurisdiction: Optional section specifying the applicable law and jurisdiction for dispute resolution

What schedules should be included in a Performance SBLC?

1. Schedule A - Drawing Certificate Template: Standard format and requirements for beneficiary to make claims under the SBLC

2. Schedule B - Underlying Contract Reference: Reference details and key terms of the main contract being guaranteed by the SBLC

3. Schedule C - Bank Authentication Procedures: Detailed procedures and requirements for authenticating and processing SBLC claims

4. Schedule D - Required Documents for Drawing: Comprehensive list of documents required to be presented with any drawing request

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

United States

Document Type

Bank Guarantee

Sector

Banking

Cost

Free to use
Clauses
























Relevant Industries

Construction

Infrastructure Development

Energy

Manufacturing

International Trade

Relevant Teams

Finance

Legal

Treasury

Operations

Risk Management

Relevant Roles

Chief Financial Officer

Treasury Manager

Project Manager

Contract Manager

Risk Manager

Industries

Uniform Commercial Code (UCC) Article 5: Primary U.S. legislation governing letters of credit, providing fundamental rules for issuance, amendment, and enforcement, as well as defining rights and obligations of all involved parties

International Standby Practices (ISP98): International standard rules specifically designed for standby letters of credit, commonly incorporated by reference in SBLCs to provide operational guidelines and standards

Uniform Customs and Practice (UCP 600): International rules primarily for commercial letters of credit, may be relevant to SBLCs if specifically incorporated into the agreement

Federal Reserve Regulation H: Federal regulation governing state member banks' operations including letter of credit issuance and management

Federal Reserve Regulation K: Federal regulation specifically focused on international banking operations and their letter of credit activities

OCC Regulations 12 CFR Part 7.1016: Office of the Comptroller of the Currency regulations specifically addressing letters of credit and independent undertakings

State Banking Laws: State-specific banking regulations that may affect SBLC enforceability and requirements in the jurisdiction of issuance

Bank Secrecy Act: Anti-money laundering legislation requiring financial institutions to assist government agencies in detecting and preventing money laundering in letter of credit transactions

USA PATRIOT Act: Federal law expanding anti-money laundering requirements and imposing additional compliance obligations on financial institutions handling letters of credit

OFAC Regulations: Office of Foreign Assets Control regulations governing international sanctions compliance in letter of credit transactions

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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