The Advance Performance Guarantee is a fundamental document in Saudi Arabian business transactions, particularly in large-scale projects where advance payments are required. This guarantee serves as a risk mitigation tool for project owners who need to make upfront payments while ensuring compliance with both Saudi law and Islamic finance principles. The document is typically issued by a licensed bank in Saudi Arabia and provides an unconditional commitment to repay the advance payment amount if the contractor fails to perform. The guarantee must align with SAMA regulations and include specific elements such as the guarantee amount, validity period, and triggering conditions for payment. It's particularly crucial in government contracts where advance payments are regulated by the Government Tenders and Procurement Law.
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1. Bank Details and Reference: Letterhead and reference number of the issuing bank
2. Guarantee Number: Unique identifier for the guarantee
3. Date: Issue date of the guarantee
4. Beneficiary Details: Full name and address of the party receiving the guarantee
5. Principal Details: Full name and address of the party on whose behalf the guarantee is issued
6. Underlying Contract Reference: Details of the main contract for which the advance payment is being made
7. Guarantee Amount: The maximum amount covered by the guarantee, expressed in both numbers and words
8. Purpose of Guarantee: Clear statement of the guarantee's purpose regarding advance payment
9. Validity Period: Start and end dates of the guarantee, including any automatic extension conditions
10. Payment Terms: Conditions under which the guarantee becomes payable and payment process
11. Governing Law: Reference to Saudi law and Shariah principles as governing law
12. Bank's Undertaking: Unconditional commitment to pay upon first demand
1. Language Provision: Required when the guarantee is issued in both Arabic and English, specifying which version prevails
2. Force Majeure Clause: Optional clause defining circumstances beyond control that might affect the guarantee
3. Assignment Restrictions: Include when transfer of guarantee rights needs to be restricted
4. Reduction Clause: Used when the guarantee amount can be progressively reduced based on contract performance
5. SAMA Regulations Compliance: Specific reference to SAMA regulations when the guarantee involves cross-border elements
6. Dispute Resolution: Optional detailed dispute resolution procedure, needed for international parties
1. Form of Demand: Template for making a claim under the guarantee
2. Copy of Underlying Contract: Relevant excerpts or full copy of the contract requiring the advance payment
3. Payment Schedule: If applicable, schedule of reduction in guarantee amount
4. Authorization Documents: Copies of corporate authorizations and specimen signatures
5. SAMA Compliance Certificate: If required, documentation confirming compliance with SAMA regulations
Relevant legal definitions
Clauses
Relevant Industries
Construction
Infrastructure Development
Oil and Gas
Manufacturing
Defense
Technology and Communications
Healthcare
Education
Transportation
Real Estate Development
Energy
Mining
Public Works
Engineering Services
Relevant Teams
Legal
Finance
Treasury
Procurement
Project Management
Risk Management
Commercial
Compliance
Business Development
Contract Administration
Relevant Roles
Chief Financial Officer
Finance Manager
Project Manager
Contract Manager
Legal Counsel
Treasury Manager
Risk Manager
Procurement Manager
Commercial Director
Business Development Manager
Account Manager
Banking Relationship Manager
Compliance Officer
Project Director
Construction Manager
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