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Conditional Bank Guarantee for Saudi Arabia

Conditional Bank Guarantee Template for Saudi Arabia

A Conditional Bank Guarantee under Saudi Arabian law is a financial instrument where a bank provides a guarantee to a beneficiary on behalf of a principal, subject to specific conditions being met before any payment can be claimed. The document must comply with Saudi Arabian banking regulations, SAMA guidelines, and Shariah law principles. It includes detailed conditions for claims, specific documentation requirements, and clear procedures for enforcement. The guarantee serves as a risk mitigation tool in commercial transactions, providing financial security while ensuring all parties' rights are protected under Saudi jurisdiction.

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What is a Conditional Bank Guarantee?

The Conditional Bank Guarantee is a crucial financial instrument in Saudi Arabian business transactions, particularly used in construction projects, international trade, and government contracts. This document is employed when a party requires financial security for performance or payment obligations, but wants the guarantee to be subject to specific conditions before it can be called upon. The guarantee must strictly comply with Saudi Arabian banking regulations, SAMA guidelines, and Shariah principles, which prohibit uncertainty (gharar) and interest (riba). It's commonly used in scenarios where the beneficiary needs assurance of payment or performance, while the principal wants to ensure the guarantee can only be called under specific, pre-agreed circumstances. The document includes detailed conditions for claims, required documentation, and enforcement procedures, all structured within the Saudi legal framework.

What sections should be included in a Conditional Bank Guarantee?

1. Details of the Parties: Identifies the Guarantor Bank, the Beneficiary, and the Principal (the party on whose behalf the guarantee is issued)

2. Background: Explains the underlying transaction or relationship necessitating the bank guarantee

3. Definitions: Defines key terms used throughout the guarantee document

4. Guarantee Amount: Specifies the maximum amount of the guarantee in both numbers and words

5. Purpose of Guarantee: Clearly states the specific purpose for which the guarantee is being issued

6. Conditions for Claim: Details the specific conditions that must be met for the guarantee to be called upon

7. Claim Process: Outlines the procedure for making a claim under the guarantee, including required documentation

8. Duration and Validity: Specifies the effective date and expiry date of the guarantee

9. Governing Law and Jurisdiction: Confirms Saudi law as governing law and specifies jurisdiction for disputes

10. Shariah Compliance: Confirms compliance with Islamic Shariah principles

11. Notice Requirements: Details how and where notices must be served between parties

12. Bank's Rights and Obligations: Outlines the specific rights and obligations of the issuing bank

What sections are optional to include in a Conditional Bank Guarantee?

1. Language Preference: Required when the guarantee is issued in multiple languages, specifying which version prevails

2. Counter-Guarantee Provisions: Needed when there is a counter-guarantee from another bank involved

3. Assignment Restrictions: Required when there are specific restrictions on assigning rights under the guarantee

4. Force Majeure: Optional clause defining circumstances beyond control that may affect the guarantee

5. Partial Claims: Required when partial claims under the guarantee are permitted

6. Anti-Money Laundering Compliance: Required for international guarantees or high-value transactions

7. Electronic Presentation: Required when electronic submission of claims is permitted

What schedules should be included in a Conditional Bank Guarantee?

1. Schedule 1 - Form of Demand: Template for making a claim under the guarantee

2. Schedule 2 - Required Claim Documentation: List of documents required to be submitted with any claim

3. Schedule 3 - Authorized Signatories: List of persons authorized to make claims or give notices

4. Appendix A - Underlying Contract Reference: Details of the underlying contract or obligation being guaranteed

5. Appendix B - SAMA Compliance Checklist: Checklist ensuring compliance with all SAMA requirements

6. Appendix C - Supporting Documents: Copies of relevant supporting documents referenced in the guarantee

Authors

Alex Denne

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

Jurisdiction

Saudi Arabia

Publisher

Ƶ

Document Type

Bank Guarantee

Sector

Banking

Cost

Free to use
Relevant legal definitions



































Clauses

































Relevant Industries

Banking and Financial Services

Construction and Infrastructure

International Trade

Manufacturing

Energy and Utilities

Real Estate Development

Government and Public Sector

Telecommunications

Defense Contracting

Transportation and Logistics

Relevant Teams

Legal

Finance

Treasury

Compliance

Risk Management

Commercial Operations

Project Management

Trade Finance

Corporate Banking

Credit Risk

Shariah Advisory

Relevant Roles

Chief Financial Officer

Treasury Manager

Finance Director

Legal Counsel

Compliance Officer

Risk Manager

Contract Manager

Project Director

Commercial Director

Banking Relationship Manager

Trade Finance Manager

Corporate Banking Officer

Shariah Compliance Officer

Credit Risk Officer

Senior Legal Advisor

Industries







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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