Contract Performance Guarantees are essential security instruments in Saudi Arabian commercial transactions, particularly in construction, infrastructure, and government contracts. A Contract Performance Guarantee is typically required when a contractor or service provider enters into a significant commercial contract, providing the beneficiary with financial security against non-performance or default. The guarantee amount usually ranges from 5% to 10% of the contract value, though government contracts may require higher percentages. Under Saudi law, these guarantees must comply with Sharia principles and SAMA regulations, making them unconditional, irrevocable, and payable on first demand. The document serves as an independent obligation from the underlying contract, ensuring quick access to compensation for the beneficiary without the need for court proceedings to prove default.
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1. Letter Header: Bank's letterhead, reference number, and date of issuance
2. Addressee Details: Full details of the beneficiary including name, address, and commercial registration number
3. Guarantee Number: Unique reference number of the guarantee
4. Underlying Contract Reference: Details of the primary contract being guaranteed including contract number, date, and parties
5. Amount of Guarantee: The maximum guaranteed amount in both numbers and words, currency specification
6. Scope of Guarantee: Clear description of the obligations being guaranteed and the conditions under which the guarantee can be called
7. Duration and Validity: Explicit start and end dates of the guarantee, including any automatic extension conditions
8. Demand Requirements: Specific requirements and process for making a claim under the guarantee
9. Governing Law and Jurisdiction: Confirmation of Saudi law as governing law and relevant court jurisdiction
10. Authorized Signatures: Space for bank officials' signatures and bank stamp
1. Assignment Clause: Include when the guarantee needs to be transferable to another beneficiary
2. Reduction Schedule: Include when the guarantee amount reduces over time according to a specific schedule
3. Multiple Beneficiaries: Include when there is more than one beneficiary of the guarantee
4. Force Majeure: Include when specific force majeure provisions are required beyond standard provisions
5. Language Provision: Include when the guarantee is issued in multiple languages to specify which version prevails
6. SAMA Compliance Statement: Include when the guarantee is issued by a Saudi bank to confirm compliance with SAMA regulations
1. Form of Demand: Template for making a valid demand under the guarantee
2. Copy of Underlying Contract: Relevant excerpts or full copy of the contract being guaranteed
3. Authorization Documents: Copies of relevant authorization documents from the guarantor bank
4. Reduction Schedule Table: If applicable, detailed table showing the reduction of guarantee amount over time
5. Specimen Signatures: Authorized signatures for making demands under the guarantee
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