In business, buyers, sellers and contractors need to be sure they can trust the other party to perform their contractual obligations. A bank guarantee is used as a protection against non-fulfillment of another’s obligations. SABB provides you with prompt issuance of all guarantees to help you might your deadlines. In addition we assist you with the issuance of guarantees to or from your international business partners through HSBC’s global network. We are able to issue all forms of guarantees in full compliance with Shariah requirements should you so require.
A bank guarantee may be defined as an irrevocable undertaking of a bank to pay a sum of money, in the event of non-performance of a contract by a third party. Bank guarantees are issued at the request or on the instructions and under the liability of a party (Principal) or at the request or on the instructions and under the liability of a bank acting on the instructions of a principal, to another party (Beneficiary). Guarantees, by nature are separate transactions from the contract(s) on which the guarantee may be based.
Guarantees are payable against presentation of a written demand for payment and other documents specified in the guarantee.
To be valid within the Kingdom of Saudi Arabia, Tender Bonds, Performance Bonds and Advance Payment Guarantees have to be issued in the format prescribed by the Saudi Arabian Monetary Agency (SAMA).
Tender Bonds are designed to deter companies from making a tender and then rejecting the contract when it is awarded to them. Tender/Bid Bonds are usually called for, to protect the beneficiary against frivolous bidding.
Performance bonds are guarantees issued to cover the 'non-performance' of one party under a contract. The terms are simple and usually stipulate that a sum “will be paid to the beneficiary upon demand in the event that the beneficiary submits a signed statement stating default or non-performance by the applicant”. Performance bonds are designed to ensure that goods are delivered or services rendered in accordance with the terms of the contract and at the agreed time.
The basic purpose of an advance payment guarantee is to ensure that an advance payment is used in accordance with the intentions of the contract concluded between the buyer and seller. Under an advance payment guarantee, the advance payment has to be refunded if the seller fails to meet his commitments. Thus the guarantee helps to deter default.
Miscellaneous guarantees can be structured to help mitigate various risks under a contract. They will generally be in place to deter non-performance. We can provide the expertise to ensure that your interests are taken care when negotiating the terms of a guarantee.