What is a Bank Guarantee?
A Bank Guarantee is a contractual obligation between the bank, beneficiary and supplier/contractor, ensuring either payment, delivery of goods or fulfillment of contract and services.
Types
of Guarantees:
1. Performance
Guarantee - This guarantee is a security of timely delivery of goods or
performance of services according to a contract.
2. Advance
Payment Guarantee - This guarantee represents an
obligation of the bank to pay/return advance payment in the event that, after
receiving an advance payment, the Seller does not perform its contractual
obligations or does not supply the specified goods per the contract.
3. Bid/Tender
Guarante
e - This guarantee plays a role of security in cases when the Company fails to
perform its obligations to the tender organization or other party that is
stipulated in the order received by winning the tender
4. Labour
Guarantee – This type of guarantee is being issued for
the Ministry of Labour against employee visas. This could be claimed if an
employee will file a labour case against the company.
5. Payment
Guarantee - This type of guarantee is a security of payment obligations of
Buyer to Seller. It assures the
seller that the purchase price is paid on a set date.
6. Financial
Guarantee – This type of guarantee is almost the same
as Payment Guarantee. It enables the issuing party to have credit terms with
the beneficiary and assures the beneficiary of payment in cases the issuing
party defaults.
7. Warranty
Guarantee - This guarantee plays a role of
security of quality for delivery to the contract terms.
Guarantee Validity Types:
Under "Types of Guarantees",
there are guarantee Validity types
1. Fixed
Ended – the guarantee expiration is on a definite
date. The guarantee will automatically expire in the date specified whether the
guarantee is returned or not.
2. Open
Ended – No specific date for guarantee expiration. The guarantee will only be
cancelled upon return of the original guarantee to the bank and usually is
accompanied by a No Objection Certificate from the beneficiary.
3. Auto
Renewable – There is an initial expiration date
mentioned in the guarantee text but in case the guarantee is not returned
before that date, the guarantee will automatically be renewed.
Guarantee Formats:
1. Specimen –
It will follow a specific specimen as required by the beneficiary. Upon
application, it will be reviewed by the bank whether it is acceptable or not.
The bank may omit or add clauses in some cases.
2. Standard –
It follows the standard format as provided by the bank. It might differ from
bank to bank.
Specimen
Format- 01
Quote
NOT OVER xxxxxx
Date:
TO:Bank
Name
Bank
Address
Dear
Srs,
Whereas
Abu Dhabi Ports Company PJSC (hereinafter referred to as “VENDOR”) has
serviced xxxxxxxxxx a company organized and existing under the laws
of xxxxxxx and having its registered office at xxxxxxxxxxxxx., , a company
organized and existing under the laws of xxxxxxx (hereinafter referred to as
“Customer”) whereas Customer is providing bank guarantee to cover
any liability to the VENDOR.
Therefore,
in consideration of the above, we (Bank) , (the “issuing Bank”)
established in xxxx and having our address at (address of bank)., hereby
irrevocably and unconditionally guarantee and undertake to VENDOR, without any
right of defense set off or counterclaim whether on our behalf or on behalf of
Customer to pay to VENDOR a sum not exceeding in the aggregate xxx
(hereinafter referred to as the “Guarantee Amount”) or any lesser sum
specified by VENDOR by transfer to an account in VENDOR’s name at such bank as
VENDOR shall stipulate or in such other manner as shall be acceptable to VENDOR
upon receipt of VENDOR’s written demand(s) addressed to us in the event that
Customer fails to perform or fulfill any of his obligations .
Such
written demand(s) by VENDOR shall be conclusively binding on us for all
purposed under the Bank Guarantee. We further agree that any payment made
hereunder shall be made free and clear of and without deductions for or on
account of any present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings of any nature whatsoever and by whomsoever imposed.
This
Bank Guarantee shall be binding on the issuing Bank and on its successors and
assigns.
This
guarantee shall come into force from the abovementioned date and shall expire
on (date) (herein after referred to as the “Expiry Date”) (the “Initial
Term”) and thereafter shall be renewed automatically until No Objection
Certificate has been issued by Abu Dhabi Ports Company PJSC, or the
original is returned to us, whichever comes first.
This
Bank Guarantee shall be governed by and interpreted under the laws and
regulations of the xxxxx and the federal laws of the xxxx
Yours
faithfully,
Authorized
Signature of Issuing
Bank
Authorized Signature of Issuing Bank
Specimen
Format- 02
GUARANTEE TYPE
–MATERIAL PERFORMANCE GUARANTEE FIXED EXPIRY
:27:1/1
:20:FRWAV70599800101 -
:23:Issue
:30:190731
:40C:NONE
:77C:BENEFICIARY GUARANTEE FORMAT REFERENCE – MPG FIXED
AMOUNT: <CCY><Amount
in Numbers>
At the request of <Applicant Name> (referred to hereinafter as the Contractor),
having its registered office at <Applicant
Address> we hereby issue in favour of ABC
COMPANY (the
Beneficiary), having its registered office at <Address>, our irrevocable
Guarantee for the above mentioned amount as a guarantee against defects and for
the satisfactory performance as per specification of all the materials supplied
under Contract Number. <Contract Number> dated
<Contract Date
strictly in DD-MMM-YYYY>
In this
connection, we hereby consider ourselves responsible jointly and severally with
the above named for the unconditional payment to the Beneficiary, of the above sum,
on Beneficiary’s first demand, in whole or in part and notwithstanding any
objections on the part of the above named.
This guarantee is
valid from the date of issuance and will expire on <Expiry Date strictly in DD-MMM-YYYY>
Any claims, for
payment under this guarantee should reach this office on or before the expiry
date mentioned above after which date
this guarantee shall stand null and void.
We agree and declare that, at beneficiary’s option, this guarantee is
also available at the counters of BANK (the Advising Bank). We hereby
authorize the Advising Bank to accept delivery of beneficiary instruction,
advice or claim against this guarantee on our behalf without any liability on
the part of the Advising Bank. Accordingly, notwithstanding anything said in
the contrary in this guarantee, we, the issuing bank, unconditionally and
irrevocably confirm that any of beneficiary’s instructions, advice and claims
delivered to the Advising Bank in respect of this guarantee that are made
within the validity period of the guarantee (including but not limited to claim
(s) against the guarantee) shall be construed as having been delivered to us at
our counters, irrespective of whether such instruction, advice or claim is
presented in electronic or physical form. We undertake to honor such
instructions, advices and claims, without deduction of any kind in accordance
with the terms of the guarantee received through and from the Advising
Bank. For the sake of clarity, availability of this guarantee at the
counters of the Advising Bank shall not, in any manner, prejudice or invalidate
beneficiary preference and/or right to directly deal with us OR deliver to us
any written instructions or claim on the guarantee.
This guarantee shall be governed and construed in accordance with the
laws and regulations of the Emirate of Dubai and (to the extent that the same
are applicable therein) the laws and regulations of the United Arab Emirates.
Specimen
Format- 03
SUPPLIER'S ADVANCE PAYMENT GUARANTEE FORMAT
Description of Goods and Services:
SUPPLY AND INSTALLATION OF XXXX
BENEFICIARY'S NAME AND ADDRESS.
ABC COMPANY XXXX
(the "Design Builder")
Green Community, Dubai Investment Park 1
ADDRESSXXXX
SUBJECT: OUR ADVANCE PAYMENT GUARANTEE NO.FOR AMOUNTX XXX
XXX (the "Supplier"), whose place of business is at XXX…. awarded a contract for the supply of
the above named Goods and Services for the value of XXX
NOW IN CONSIDERATION of you making an Advance Payment of XXX to the
Supplier's XX18 held with us, being 30% of the value of the Agreement excluding
sums of contingencies, by this bond we, Bank (the "Guarantor"), whose
address is…………………………….. FAB ABU DHABI guarantee
you a sum not exceeding XXX on your first written demand, stating that the supplier has failed to fulfill any or all of
their contractual obligation under the above said contract and in to a
bank account as specified in the to pay demand, without reference to or
representation on behalf of the Supplier.
It is understood that our liability towards you will be
progressively reduced by the amount repaid to you by the Supplier as contained
in the certificates and payments against the said Advance Payment, as advised
by you to us.
This irrevocable and unconditional guarantee will be effective from
Date of Issue and shall be valid until 15 July 2021 (Expiry
Date).
Any demand for payment must contain your authorized signature(s) which needs to be duly verified by your banker. The
original demand must be received by us In our office (address .. ) either through
a)
hand
delivery or through registered courier along with the original guarantee and
all amendments , if any or
b)
through authenticated swift to our Swift (.. .
) through your Bankers with a confirmation that Original guarantee and
amendments has been couriered to us, before [4:00 pm (UAE time)] on or before
the expiry date, when this guarantee shall expire and shall become
automatically null and void without need to be returned to us.
This Guarantee
is subject to the Uniform Rules for Demand Guarantees (URDG) 2010 revision, ICC
Publication No. 758 with the exception of the
supporting statement under article 15(a) which is excluded. As to matters not
governed by URDG 758, this Guarantee shall be governed by the laws of Abu
Dhabi/Dubai, United Arab Emirates and any disputes concerning this Guarantee
will be submitted to the courts in Abu Dhabi/Dubai, United Arab Emirates.
Signed on behalf of………Bank
Specimen
Format- 04
QUOTE
SUPPLIER’S ADVANCE PAYMENT GUARANTEE
Description
of Goods & Services to be provided under the Purchase Agreement: Design, manufacture, testing, supply
of Wet well cleaning Pumps
BANK’S
NAME AND ADDRESS
BENEFICIARY’S NAME AND ADDRESS:
XXXX“Beneficiary”)
Dear Sirs,
SUBJECT: OUR ADVANCE PAYMENT BOND NO. ______ FOR
________
WHEREAS Ebara Pumps Middle East FZE (the
“Supplier”), whose place of business is at ………………., has been awarded a contract
for the supply of the above named Goods and Services for the value of USD
383,392.00(USD Three eighty three thousand three hundred and ninety two only)
NOW IN CONSIDERATION of you making an Advance
Payment of USD XXX(USD …. only) to the Supplier’s
account XXXXXXXXX held with us, being [20%] of
the value of the Agreement excluding sums of contingencies, by this bond we,
…………..Bank (the “Guarantor”), whose address is …………………………….. , guarantee to pay
you a sum not exceeding …………
on your first written demand, stating that the supplier has failed to fulfill any or all of
their contractual obligation under the above said contract and in to a bank account as it will be specified in
the demand, without reference to or representation on behalf of the Supplier.
It is understood that our liability towards you
will be progressively reduced by the amount repaid to you by the Supplier as
contained in the certificates and payments against the said Advance Payment , as advised by you to us.
This irrevocable and unconditional guarantee will
be effective from …………….. and shall be valid until …dd/mm/yyyy
, or until the amount of the Advance Payment is fully recovered whichever is earlier later.
Any demand for payment must contain your
authorized signature(s) which needs to be duly verified by your banker . The
original demand must be received by us in our office (address ……) either
through
a)
hand
delivery or through registered courier along with the original gtee and amendments , if any or
b)
though
authenticated swift to our Swift (………) through your Bankers with a confirmation that
Original guarantee and amendments has been couriered to us.
up to the expected before [4:00 pm (UAE time)] on or before the
expiry date, when this guarantee shall expire and shall become automatically
null and void without need to be returned to us.
This Guarantee is subject to the Uniform Rules
for Demand Guarantees (URDG) 2010 revision, ICC Publication No. 758
UNQUOTE
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