A Performance Letter of Guarantee is commonly used in Saudi Arabian business transactions where one party (the principal) needs to provide financial security to another party (the beneficiary) regarding their performance obligations. This document is particularly crucial in construction projects, government contracts, and large commercial transactions. The Performance Letter of Guarantee must comply with Saudi Arabian Monetary Authority (SAMA) regulations and Sharia law principles, making it distinct from conventional guarantees used in other jurisdictions. It typically specifies the guaranteed amount, validity period, claiming conditions, and expiry terms. The document serves as a risk management tool, providing beneficiaries with immediate access to funds if the principal defaults on their obligations, while ensuring the transaction remains compliant with Islamic banking principles.
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1. Bank Details and Reference: Issuing bank's details, letter reference number, and date of issuance
2. Beneficiary Information: Complete details of the party in whose favor the guarantee is issued
3. Principal Information: Complete 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. Project/Contract Reference: Details of the underlying project or contract for which the guarantee is being issued
6. Guarantee Terms: Core terms including validity period, conditions for calling the guarantee, and payment obligations
7. Expiry Conditions: Specific conditions regarding the expiry or termination of the guarantee
8. Claim Procedure: Process and requirements for making a claim under the guarantee
9. Governing Law Statement: Clear statement that the guarantee is governed by Saudi law and Sharia principles
1. Multiple Beneficiary Clause: Required when the guarantee is issued in favor of multiple beneficiaries
2. Assignment Clause: Include when the guarantee needs to be transferable
3. Reduction Clause: Include when the guarantee amount can be reduced in stages based on project completion
4. Force Majeure Provisions: Optional clause addressing extraordinary circumstances that may affect the guarantee
5. Language Provision: Required when the guarantee is issued in multiple languages
6. SAMA Compliance Statement: Additional statement required for certain types of government or large-scale project guarantees
1. Payment Schedule: If applicable, schedule of reduction in guarantee amount over time
2. Form of Demand: Prescribed format for making a claim under the guarantee
3. Contract Extract: Relevant excerpts from the underlying contract requiring the performance guarantee
4. Authorization Documents: Copies of corporate authorizations and powers of attorney for signatories
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
Government and Public Sector
Real Estate Development
Energy and Utilities
Manufacturing
Telecommunications
Defense and Security
Healthcare
Education
Relevant Teams
Legal
Finance
Treasury
Procurement
Risk Management
Compliance
Commercial
Project Management
Construction Management
Corporate Banking
Business Development
Relevant Roles
Chief Financial Officer
Project Manager
Contract Manager
Legal Counsel
Treasury Manager
Bank Relationship Manager
Procurement Manager
Risk Manager
Commercial Director
Finance Director
Compliance Officer
Project Director
Construction Manager
Business Development Manager
Corporate Banking Officer
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