The Advance Payment Guarantee Bond is a crucial financial instrument in Saudi Arabian business transactions, particularly in construction, infrastructure, and large-scale projects. It is issued when a beneficiary (employer/buyer) provides advance payment to a contractor or supplier but requires security for that payment. The guarantee, issued by a bank, ensures that the advance payment will be returned if the contractor fails to perform their obligations under the main contract. This document must comply with Saudi Arabian Banking Control Law, SAMA regulations, and Sharia principles, making it distinct from conventional guarantees in other jurisdictions. The bond typically specifies the guaranteed amount (matching the advance payment), validity period, conditions for calling the guarantee, and claim procedures. It's particularly important in government contracts where advance payments are common and strictly regulated.
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1. Bank Details and Reference: Identifier information of the issuing bank, guarantee reference number, and date
2. Beneficiary Details: Full name and address of the party receiving the guarantee (the employer/buyer)
3. Principal Details: Full name and address of the party for whom the guarantee is issued (the contractor/seller)
4. Underlying Contract Reference: Details of the main contract or agreement for which the advance payment is being made
5. Guarantee Amount: The specific amount of the guarantee in both numbers and words
6. Purpose of Guarantee: Clear statement that this is an advance payment guarantee and its specific purpose
7. Terms of Guarantee: Core conditions of the guarantee including validity, payment obligations, and trigger conditions
8. Expiry Conditions: Specific conditions and date when the guarantee will expire
9. Claim Procedure: Process and requirements for making a claim under the guarantee
10. Governing Law and Jurisdiction: Confirmation of Saudi Arabian law as governing law and relevant jurisdiction
1. Language Provision: Required when dual language versions are provided, specifying which version prevails
2. Assignment Restrictions: Include when transfer or assignment of the guarantee needs to be specifically restricted
3. Force Majeure Provisions: Include for longer-term guarantees where force majeure events need to be addressed
4. Government Contract Compliance: Required when the guarantee relates to government contracts, including specific compliance requirements
5. Sharia Compliance Declaration: Include when explicitly required to confirm compliance with Islamic banking principles
6. Counter-Guarantee References: Include when the guarantee is issued based on a counter-guarantee from another bank
1. Form of Demand: Template for making a valid demand under the guarantee
2. Authentication Documents: Copies of authorized signatures and authentication requirements
3. Contract Extract: Relevant extract from the underlying contract referring to the advance payment requirement
4. Payment Schedule: If applicable, schedule of how the advance payment will be amortized or recovered
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
Oil and Gas
Manufacturing
Defense Contracting
Technology and Telecommunications
Healthcare
Real Estate Development
Energy and Utilities
Government and Public Sector
Relevant Teams
Legal
Finance
Treasury
Procurement
Project Management
Risk Management
Compliance
Commercial
Banking Operations
Islamic Banking
Relevant Roles
Chief Financial Officer
Project Manager
Contract Manager
Treasury Manager
Bank Relationship Manager
Legal Counsel
Compliance Officer
Risk Manager
Procurement Manager
Financial Controller
Project Director
Commercial Director
Bank Guarantee Officer
Islamic Banking Specialist
Senior Relationship Manager
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