The Standby Letter of Credit and Bank Guarantee is a vital financial instrument used to provide security in commercial transactions under South African law. It is typically employed when parties seek a reliable payment security mechanism, particularly in international trade, large-scale projects, or significant commercial contracts. The document provides the beneficiary with the assurance of payment from a bank if the applicant fails to perform specified obligations. This instrument combines features of both documentary credits and demand guarantees, making it particularly versatile. The document must comply with South African banking regulations while following international banking practices, making it suitable for both domestic and cross-border transactions. It includes detailed provisions for drawing conditions, document presentation requirements, and payment terms, providing clarity and certainty for all parties involved.
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1. Bank Details and Reference: Full details of the issuing bank, including branch, registration number, and reference number of the instrument
2. Beneficiary Details: Complete identification of the beneficiary, including full legal name, registration number if applicable, and address
3. Applicant Details: Complete identification of the applicant/principal, including full legal name, registration number if applicable, and address
4. Instrument Type and Amount: Clear specification of whether it's a standby letter of credit or bank guarantee, and the maximum amount covered, including currency
5. Purpose and Underlying Transaction: Description of the underlying transaction or obligation that this instrument is securing
6. Effective Date and Expiry: Clear statement of when the instrument becomes effective and its expiry date/conditions
7. Drawing Terms and Conditions: Specific conditions and documentation required for drawing under the instrument
8. Form of Demand: Exact format and content requirements for making a valid demand under the instrument
9. Payment Terms: Specifics of how and when payment will be made upon a valid demand
10. Governing Law and Jurisdiction: Statement of applicable law (South African) and jurisdiction for disputes
11. Rules and Practices: Reference to applicable international rules (such as UCP 600 or ISP98) governing the instrument
1. Transferability Clause: Include when the instrument needs to be transferable to other beneficiaries
2. Partial Drawings Clause: Include when multiple partial drawings are to be permitted
3. Reduction Schedule: Include when the guarantee amount reduces over time according to a specific schedule
4. Counter-Guarantee Provisions: Include when there is a counter-guarantee arrangement with another bank
5. Assignment Provisions: Include when rights under the instrument may be assigned to third parties
6. Language Declaration: Include when the instrument may be used internationally and language preferences need to be specified
7. Force Majeure Clause: Include when specific force majeure provisions are required beyond standard banking practice
8. Electronic Presentation Clause: Include when electronic presentation of documents is permitted
1. Schedule A - Form of Demand: Template for the prescribed format of demand to be used by the beneficiary
2. Schedule B - Required Documents: Detailed list of all documents required to be presented with a demand
3. Schedule C - Reduction Schedule: If applicable, detailed schedule showing how the guarantee amount reduces over time
4. Appendix 1 - Underlying Agreement Reference: Key details or extract from the underlying agreement that this instrument secures
5. Appendix 2 - Specimen Signatures: Authenticated specimen signatures of authorized signatories
6. Appendix 3 - Swift Format: If applicable, prescribed SWIFT format for electronic communications
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