The Indemnity Bond Agreement is a critical risk management instrument commonly used in UAE business transactions to provide financial security and protection against potential losses. This document is particularly relevant when one party needs to secure another against specific risks, liabilities, or potential losses in commercial relationships. The agreement, governed by UAE law and specifically structured under the UAE Civil Code (Federal Law No. 5 of 1985), outlines the scope of indemnity, triggering events, claim procedures, and payment obligations. It is frequently used in construction projects, commercial transactions, and financial arrangements where parties seek to allocate risk and establish clear liability frameworks. The document typically includes detailed provisions for enforcement, ensuring compliance with UAE legal requirements and providing certainty for all parties involved.
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1. Parties: Identification of the Indemnifier (guarantor) and the Beneficiary, including full legal names and addresses
2. Background: Context of the indemnity bond, including the underlying transaction or relationship necessitating the bond
3. Definitions: Key terms used throughout the agreement, including 'Indemnified Amount', 'Triggering Event', and 'Claim Period'
4. Bond Amount: Specification of the maximum indemnity amount and currency
5. Scope of Indemnity: Detailed description of what losses, damages, or events are covered by the indemnity
6. Term and Duration: Period of validity of the bond, including start date and expiry conditions
7. Claims Procedure: Process for making claims under the bond, including notice requirements and documentation
8. Payment Terms: Timeframe and method for payment upon valid claims
9. Representations and Warranties: Standard declarations by the Indemnifier regarding capacity and authority
10. Governing Law and Jurisdiction: Explicit reference to UAE law and jurisdiction of UAE courts
11. Notices: Communication procedures and contact details for formal notices
12. Execution: Signature blocks and execution formalities
1. Multiple Indemnifiers: Required when there is more than one indemnifier, specifying joint and several liability
2. Security Provisions: Include when additional security (such as assets or guarantees) is provided to support the bond
3. Step-in Rights: Used when the beneficiary has rights to take specific actions upon triggering events
4. Assignment and Transfer: Include if the bond rights may be transferred or assigned to third parties
5. Force Majeure: Optional clause defining events that might affect the operation of the bond
6. Dispute Resolution: Alternative dispute resolution procedures, if agreed between parties
7. Amendments and Modifications: Procedures for changing bond terms, if flexibility is required
8. Costs and Expenses: Allocation of costs related to bond preparation and enforcement
1. Schedule 1 - Form of Demand: Template for making claims under the bond
2. Schedule 2 - Specified Events: Detailed list of events triggering the indemnity obligation
3. Schedule 3 - Security Details: Description of any security or collateral provided
4. Schedule 4 - Calculation of Indemnity Amount: Formula or method for calculating indemnity amounts
5. Schedule 5 - Supporting Documents: List of required documentation for bond validity
6. Appendix A - Power of Attorney: If required for execution or enforcement
7. Appendix B - Corporate Approvals: Relevant corporate authorizations and board resolutions
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