The Open Bank Guarantee is a fundamental financial instrument widely used in Saudi Arabian business transactions to provide financial security and facilitate commercial operations. This document becomes necessary when a party requires financial backing from a bank to secure their obligations in various business contexts, such as construction projects, tender submissions, or trade transactions. The guarantee, issued in compliance with Saudi Arabian banking regulations and Shariah law, outlines the bank's commitment to pay a specified amount to the beneficiary upon receiving a valid demand. It contains essential elements including the guarantee amount, validity period, conditions for demand, and payment terms. The document must adhere to SAMA guidelines and Islamic finance principles, making it a unique instrument that combines international banking practices with local regulatory requirements.
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1. Parties: Identification of the Bank (Guarantor), the Applicant (Principal), and the Beneficiary
2. Background: Context of the guarantee, including the underlying transaction or relationship necessitating the guarantee
3. Definitions: Key terms used in the guarantee, including specific banking and Islamic finance terminology
4. Guarantee Amount and Currency: Clear statement of the maximum amount guaranteed and the currency of payment
5. Scope of Guarantee: Detailed description of the obligations being guaranteed and conditions for calling on the guarantee
6. Duration and Validity: Term of the guarantee, including effective date and expiry conditions
7. Islamic Finance Compliance: Declaration of Shariah compliance and relevant Islamic banking principles applied
8. Demand Requirements: Procedure and conditions for making a demand under the guarantee
9. Payment Terms: Terms and conditions for payment upon valid demand, including payment timeline
10. Bank's Rights and Obligations: Detailed outline of the guarantor bank's rights, obligations, and limitations
11. Governing Law and Jurisdiction: Specification of Saudi Arabian law as governing law and relevant jurisdiction
12. Notices: Communication procedures and contact details for all parties
13. Execution: Signature blocks and execution requirements
1. Counter-Indemnity: Terms of indemnification from the applicant to the bank, required when the applicant is providing counter-security
2. Assignment Provisions: Rules regarding assignment of rights, included when assignment is permitted
3. Foreign Currency Provisions: Special provisions for guarantees involving foreign currency, needed for international transactions
4. Multiple Beneficiaries: Additional provisions when there are multiple beneficiaries
5. Step-In Rights: Provisions allowing the bank to step into the underlying contract, included in complex commercial guarantees
6. Automatic Extension Clause: Provisions for automatic extension of the guarantee period, included when required by the underlying transaction
1. Form of Demand: Template for making a valid demand under the guarantee
2. Required Documents: List of documents required to be submitted with any demand
3. Fee Schedule: Details of bank fees, charges, and commission
4. Counter-Indemnity Agreement: Separate agreement for the applicant's indemnification obligations
5. Specimen Signatures: Authorized signatures for all parties
6. Underlying Contract Summary: Summary of the main contract or obligation being guaranteed
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
International Trade
Real Estate Development
Manufacturing
Government and Public Sector
Energy and Utilities
Telecommunications
Retail and Commerce
Healthcare
Education
Relevant Teams
Legal
Finance
Treasury
Compliance
Risk Management
Procurement
Project Management
Business Development
Corporate Secretariat
Trade Finance
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Banking Relationship Manager
Legal Counsel
Corporate Lawyer
Compliance Officer
Risk Manager
Project Manager
Procurement Manager
Contract Manager
Business Development Director
Company Secretary
Financial Controller
Trade Finance Manager
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