The Bank Guarantee Letter is a crucial financial instrument in Saudi Arabian commerce, commonly used to secure various business obligations and transactions. It represents an irrevocable commitment from a bank to make payment to a beneficiary upon compliant demand, typically used in contexts such as bid bonds, performance guarantees, or advance payment guarantees. The document must strictly comply with Saudi Central Bank (SAMA) regulations and Shariah principles, making it distinct from conventional guarantees in other jurisdictions. Banks operating in Saudi Arabia must ensure their Bank Guarantee Letters incorporate specific local requirements while maintaining international banking standards. The guarantee can be issued for various amounts and durations, depending on the underlying commercial transaction, and may be either direct or structured with counter-guarantees from other banks.
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1. Bank Details and Reference Number: Full details of the issuing bank, branch, and unique guarantee reference number
2. Beneficiary Information: Complete details of the party in whose favor the guarantee is issued
3. Principal Information: Details of the party on whose behalf the guarantee is being issued
4. Guarantee Amount: The specific amount of the guarantee in both numbers and words, including currency
5. Purpose of Guarantee: Clear statement of what the guarantee covers (e.g., bid security, performance, advance payment)
6. Underlying Transaction Reference: Reference to the primary contract or tender that the guarantee relates to
7. Validity Period: Clear start and end dates of the guarantee, including any automatic extension clauses
8. Payment Conditions: Terms under which the bank will make payment upon demand
9. Governing Law and Jurisdiction: Specification of Saudi law and relevant jurisdiction for disputes
1. Reduction Clause: Used in performance guarantees where the guarantee amount reduces over time according to project milestones
2. Assignment Restriction: Include when transfer of guarantee rights needs to be explicitly prohibited or restricted
3. Shariah Compliance Declaration: Required when specifically requested by parties to confirm compliance with Islamic principles
4. Counter-Guarantee Reference: Needed when the guarantee is issued based on a counter-guarantee from another bank
5. Special Beneficiary Requirements: Any additional clauses specifically requested by the beneficiary and agreed by the bank
1. Payment Schedule: Required for guarantees with staged reduction amounts or multiple trigger events
2. Project Details: When the guarantee covers multiple projects or contract components requiring detailed description
3. Authorized Signatories: List of persons authorized to make demands under the guarantee, if specified
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
Oil and Gas
Manufacturing
Trading and Commerce
Real Estate Development
Government and Public Sector
Technology and Telecommunications
Healthcare
Education
Relevant Teams
Legal
Compliance
Corporate Banking
Trade Finance
Risk Management
Treasury
Credit Administration
Banking Operations
Commercial
Project Management
Relevant Roles
Bank Manager
Credit Officer
Legal Counsel
Compliance Officer
Treasury Manager
Trade Finance Manager
Risk Manager
Corporate Banking Officer
Chief Financial Officer
Commercial Director
Contract Manager
Project Manager
General Counsel
Banking Operations Manager
Relationship Manager
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