The Financial Guarantee And Performance Guarantee is a critical document in Saudi Arabian business transactions, particularly in large-scale projects and commercial contracts. It serves as a risk mitigation tool by providing dual protection: securing financial obligations and ensuring performance standards. This document is essential when a party requires assurance of both payment and performance from another party, common in construction projects, government contracts, and major commercial transactions. The guarantee must comply with Islamic Shariah principles, Saudi banking regulations, and the requirements of the Saudi Central Bank (SAMA). It's typically issued by banks or financial institutions and can be called upon in cases of default in either financial payments or performance obligations. The document's structure accommodates the unique aspects of Saudi Arabian law while providing internationally recognized security mechanisms.
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1. Parties: Identification of Guarantor, Principal Obligor, and Beneficiary with full legal names and addresses
2. Background: Context of the underlying transaction and purpose of the guarantee
3. Definitions: Key terms used in the guarantee, including 'Guaranteed Obligations', 'Guarantee Period', and 'Demand Notice'
4. Guarantee and Indemnity: Core guarantee provisions, including scope and nature of guaranteed obligations
5. Scope of Financial Guarantee: Specific financial obligations covered, maximum liability amount, and currency
6. Scope of Performance Guarantee: Performance obligations covered, standards of performance, and completion criteria
7. Demand Requirements: Process and formalities for making a valid demand under the guarantee
8. Payment Terms: Timeline and mechanism for payment upon valid demand, ensuring Shariah compliance
9. Duration and Expiry: Term of the guarantee, conditions for extension, and expiry provisions
10. Representations and Warranties: Statements of fact and assurances from the guarantor
11. Governing Law and Jurisdiction: Confirmation of Saudi law application and jurisdiction of Saudi courts
1. Counter Indemnity: Terms for reimbursement by the Principal Obligor to the Guarantor, used when the guarantee is issued by a bank
2. Assignment and Transfer: Provisions regarding transfer of guarantee rights, included when transfer is contemplated
3. Multiple Guarantors: Additional provisions for cases with more than one guarantor
4. Step-In Rights: Provisions allowing guarantor to take over performance, relevant for performance guarantees
5. Security Provisions: Details of any collateral securing the guarantee obligations
6. Currency Provisions: Required for cross-border transactions involving multiple currencies
7. Force Majeure: Provisions for unforeseen circumstances affecting performance obligations
1. Form of Demand: Template for making a valid demand under the guarantee
2. Underlying Contract Summary: Key terms of the primary contract being guaranteed
3. Performance Criteria: Detailed specifications of required performance standards
4. Authorization Documents: Corporate and regulatory approvals for the guarantee
5. Payment Schedule: Schedule of any installment payments or financial obligations
6. Contact Details: List of authorized representatives and notice recipients
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
Energy and Utilities
Manufacturing
Real Estate Development
Government and Public Sector
Oil and Gas
Telecommunications
Mining and Resources
Healthcare
Education
Relevant Teams
Legal
Finance
Treasury
Risk Management
Compliance
Project Management
Operations
Commercial
Corporate Banking
Business Development
Relevant Roles
Chief Financial Officer
Legal Counsel
Project Manager
Contract Manager
Risk Manager
Treasury Manager
Corporate Finance Director
Compliance Officer
Business Development Director
Operations Director
Commercial Director
Banking Relationship Manager
Chief Legal Officer
Project Finance Manager
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