The Financial Guarantee And Performance Guarantee is a crucial security instrument in Malaysian commercial transactions, particularly in construction, infrastructure, and large-scale commercial projects. It provides dual protection by guaranteeing both financial obligations and performance obligations of the principal debtor/contractor. This document is commonly required in scenarios where a party needs assurance of both payment and performance, such as in construction contracts, supply agreements, or project financing. The guarantee must comply with Malaysian banking regulations and can be structured to accommodate both conventional and Islamic banking requirements. It typically includes specific trigger events for calling on the guarantee, detailed performance metrics, and clear procedures for making demands. The document's usage has increased significantly in Malaysian infrastructure and development projects, particularly with the government's focus on large-scale development initiatives.
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1. Parties: Identification of Guarantor, Principal (the party whose obligations are being guaranteed), and Beneficiary
2. Background: Context of the guarantee, reference to the underlying agreement(s), and relationship between parties
3. Definitions: Key terms including Guaranteed Sum, Performance Obligations, Guarantee Period, and Demand Notice
4. Guarantee and Indemnity: Core guarantee obligations covering both financial and performance aspects
5. Scope of Guarantee: Detailed description of guaranteed obligations, both financial and performance-related
6. Guarantee Period: Duration of the guarantee, including conditions for extension or reduction
7. Demand and Payment: Process and requirements for making a demand under the guarantee
8. Representations and Warranties: Standard and specific representations by the Guarantor
9. Independent Obligation: Confirmation that the guarantee is independent from the underlying contract
10. Continuing Security: Nature of the guarantee as a continuing obligation
11. Non-Competition: Guarantor's agreement not to compete with Beneficiary in claiming against Principal
12. Payments: Payment terms, currency, and method
13. Governing Law and Jurisdiction: Malaysian law as governing law and jurisdiction details
1. Islamic Finance Compliance: Required if the guarantee needs to be Shariah-compliant
2. Corporate Authorizations: Required if the Guarantor is a corporation, including board resolutions and constitutional requirements
3. Counter Indemnity: Optional section where Principal provides indemnity to Guarantor
4. Security: Required if additional security is being provided to support the guarantee
5. Step-In Rights: Optional provisions allowing Guarantor to step into Principal's position
6. Assignment: Required if transfer rights need to be addressed specifically
7. Multiple Guarantors: Required if there are multiple guarantors, addressing joint and several liability
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Agreement: Copy or key terms of the agreement being guaranteed
3. Guaranteed Obligations: Detailed list of financial and performance obligations covered
4. Corporate Authorizations: Copies of relevant board resolutions and powers of attorney
5. Payment Details: Banking and account details for payments under the guarantee
6. Performance Metrics: Specific performance standards and measurement criteria
7. Security Documents: If applicable, documents relating to additional security provided
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