The Bank Guarantee Performance Bond is a crucial financial instrument in Saudi Arabia's commercial landscape, particularly for large-scale projects and government contracts. It provides security to project owners by ensuring that a bank will compensate them if a contractor fails to perform their obligations. This document is commonly required in construction contracts, major supply agreements, and government tenders in Saudi Arabia. The guarantee must comply with Saudi Arabian law, including the Banking Control Law and SAMA regulations, while adhering to Shariah principles. The amount typically ranges from 5% to 10% of the contract value, and the validity often extends throughout the contract period plus a warranty period. The document includes specific provisions for demand procedures, validity periods, and payment terms, all structured to meet local regulatory requirements and market practices.
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1. Parties: Identification of the Bank (Guarantor), the Principal (Contractor/Service Provider), and the Beneficiary
2. Background: Brief description of the underlying contract or obligation for which the performance bond is being issued
3. Definitions: Key terms used in the performance bond including 'Guarantee Amount', 'Expiry Date', 'Underlying Contract', etc.
4. Guarantee: Core section stating the bank's unconditional and irrevocable guarantee to pay the specified amount upon valid demand
5. Guarantee Amount: Specification of the maximum guaranteed amount in numbers and words
6. Validity Period: Clear statement of when the guarantee becomes effective and its expiry date
7. Demand Requirements: Conditions and procedure for making a valid demand under the guarantee
8. Payment Terms: Timeframe and method of payment upon receipt of valid demand
9. Governing Law and Jurisdiction: Explicit statement that Saudi Arabian law governs the bond and specification of jurisdiction for disputes
10. Bank's Undertaking: Declaration of the bank's commitment and confirmation that the guarantee is Shariah-compliant
1. Multiple Beneficiaries Clause: Required when the performance bond has more than one beneficiary
2. Government Contract Compliance: Additional provisions required for performance bonds related to government contracts
3. Assignment Restrictions: Specific provisions regarding whether and how the bond may be assigned
4. Force Majeure: Provisions dealing with extraordinary events that might affect the guarantee
5. Counter-Guarantee Provisions: Required when involving multiple banks or cross-border elements
6. Language Precedence: Required when the bond is issued in multiple languages
7. Shariah Board Approval: Detailed reference to Shariah board approval when required by certain institutions
1. Form of Demand: Template for making a valid demand under the guarantee
2. Copy of Underlying Contract: Summary or relevant excerpts of the contract being guaranteed
3. Authentication Documents: Copies of authorized signatures and other authentication requirements
4. Bank's Internal Approvals: Required internal bank and Shariah compliance approvals
5. Contact Details Schedule: Detailed contact information for all parties for notices and demands
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
Oil and Gas
Government and Public Sector
Real Estate Development
Manufacturing
Energy
Telecommunications
Defense Contracting
Healthcare Infrastructure
Relevant Teams
Legal
Finance
Treasury
Risk Management
Compliance
Project Management
Commercial
Operations
Procurement
Islamic Banking
Contract Administration
Relevant Roles
Project Manager
Contract Manager
Legal Counsel
Financial Director
Treasury Manager
Risk Manager
Compliance Officer
Commercial Director
Chief Financial Officer
Operations Director
Bank Relationship Manager
Construction Manager
Procurement Manager
Senior Legal Advisor
Islamic Finance Specialist
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