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Performance Standby Letter Of Credit for Saudi Arabia

Performance Standby Letter Of Credit Template for Saudi Arabia

A Performance Standby Letter of Credit under Saudi Arabian law is a financial instrument issued by a bank that provides an irrevocable undertaking to pay a specified sum upon presentation of compliant documents indicating a performance default. This document, governed by Saudi Arabian law and typically incorporating ISP98 rules, serves as a guarantee of performance for commercial contracts. It must comply with both Shariah principles and Saudi banking regulations, particularly those issued by the Saudi Central Bank (SAMA). The document includes specific terms for drawing conditions, expiry, and document presentation requirements, providing security for major commercial transactions within the Kingdom's legal framework.

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Performance Standby Letter Of Credit

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What is a Performance Standby Letter Of Credit?

The Performance Standby Letter of Credit is a crucial financial instrument in Saudi Arabian commercial transactions, particularly used in large-scale projects, construction contracts, and international trade. This document type is specifically designed to provide security against non-performance of contractual obligations, offering beneficiaries a reliable method to claim compensation in case of default. The instrument must comply with Saudi Arabian law, including Shariah principles and SAMA regulations, while typically incorporating international standards such as ISP98. It is commonly used when parties seek a more flexible alternative to traditional performance bonds, especially in international transactions. The document includes detailed provisions for drawing conditions, required documentation, and claim procedures, making it a preferred choice for complex commercial arrangements where performance security is essential.

What sections should be included in a Performance Standby Letter Of Credit?

1. Letter Reference Details: Document number, date, and place of issuance

2. Issuing Bank Details: Complete name, address, and SWIFT code of the issuing bank

3. Beneficiary Details: Full name and address of the beneficiary who can claim under the SBLC

4. Applicant Details: Full name and address of the party requesting the SBLC

5. Credit Amount: Maximum drawable amount and currency

6. Expiry Details: Expiry date and place for presentation

7. Form of Presentation: How and where documents should be presented

8. Performance Obligation Reference: Reference to the underlying contract or obligation being guaranteed

9. Drawing Terms and Conditions: Specific conditions and required documents for drawing under the SBLC

10. Governing Law Declaration: Statement that the SBLC is governed by Saudi law and ISP98

11. Authorization: Bank officer signatures and authentication details

What sections are optional to include in a Performance Standby Letter Of Credit?

1. Partial Drawings Clause: Include when partial drawings are permitted under the SBLC

2. Transfer Conditions: Include when the SBLC is transferable

3. Multiple Beneficiary Provisions: Include when there are multiple beneficiaries

4. Automatic Extension Clause: Include when the SBLC has an automatic extension feature

5. Assignment of Proceeds: Include when assignment of proceeds is permitted

6. Counter Guarantee Reference: Include when issued under a counter-guarantee structure

7. Shariah Compliance Declaration: Include when specifically required by Saudi authorities or parties

What schedules should be included in a Performance Standby Letter Of Credit?

1. Schedule A - Required Documents for Drawing: Detailed list of documents required for presentation

2. Schedule B - Form of Demand Notice: Standard format for beneficiary's demand under the SBLC

3. Schedule C - Form of Performance Default Notice: Template for declaring performance default

4. Appendix 1 - Underlying Contract Reference: Key details or extract of the underlying contract being guaranteed

5. Appendix 2 - Bank Authorization Evidence: Evidence of authority of bank signatories (where required)

Authors

Alex Denne

Head of Growth (Open Source Law) @ Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Saudi Arabia

Publisher

Ƶ

Document Type

Bank Guarantee

Sector

Banking

Cost

Free to use
Relevant legal definitions






























Clauses






























Relevant Industries

Banking & Financial Services

Construction & Infrastructure

International Trade

Energy & Utilities

Manufacturing

Real Estate Development

Oil & Gas

Government & Public Sector

Engineering & Technology

Transportation & Logistics

Relevant Teams

Legal

Finance

Treasury

Trade Finance

Risk Management

Compliance

Commercial Operations

Project Management

Credit Administration

International Banking

Documentary Credits

Relevant Roles

Chief Financial Officer

Treasury Manager

Trade Finance Manager

Project Finance Director

Legal Counsel

Contract Manager

Risk Manager

Commercial Director

Banking Relationship Manager

Compliance Officer

Project Manager

Finance Director

Corporate Banking Officer

Credit Risk Officer

Documentary Credits Specialist

Industries








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