Performance SBLC for Malaysia

Performance SBLC Template for Malaysia

A Performance Standby Letter of Credit (SBLC) under Malaysian law is a bank-issued financial instrument that provides an irrevocable undertaking to pay a specified sum to the beneficiary upon presentation of complying documents indicating a default in performance by the applicant. Governed by Malaysian banking and contract laws, particularly the Financial Services Act 2013 and the Contracts Act 1950, this document serves as a guarantee of performance for commercial contracts, ensuring that the beneficiary has recourse to financial compensation if the applicant fails to fulfill their contractual obligations.

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What is a Performance SBLC?

The Performance SBLC is a critical financial instrument used in Malaysian commercial transactions to provide security for performance obligations. It is typically required when one party needs assurance that the other party will fulfill their contractual commitments, particularly in high-value projects or international transactions. The document, governed by Malaysian law and banking regulations, establishes the conditions under which the bank will make payment, the required documentation for claims, and the validity period of the guarantee. Performance SBLCs are commonly used in construction projects, service contracts, and international trade transactions where Malaysian entities are involved, offering a robust mechanism for risk mitigation and contract enforcement.

What sections should be included in a Performance SBLC?

1. Parties: Identifies the issuing bank, beneficiary, and applicant (principal)

2. Background: Details the underlying transaction or performance obligation that the SBLC is securing

3. Definitions: Defines key terms used throughout the SBLC

4. SBLC Amount and Currency: Specifies the maximum amount available under the SBLC and the currency of payment

5. Validity Period: States the effective date and expiry date of the SBLC

6. Drawing Conditions: Specifies the conditions under which the beneficiary may make a demand under the SBLC

7. Form of Demand: Prescribes the format and content requirements for making a valid demand

8. Supporting Documents: Lists the documents that must accompany any demand under the SBLC

9. Payment Terms: Details the timing and method of payment upon receipt of a complying demand

10. Reduction and Cancellation: Provisions for reducing or cancelling the SBLC amount

11. Transfer and Assignment: States whether and how the SBLC may be transferred or assigned

12. Governing Law and Jurisdiction: Specifies the applicable law and courts having jurisdiction

What sections are optional to include in a Performance SBLC?

1. Multiple Drawing Provisions: Include when the SBLC allows for partial drawings or multiple presentations

2. Electronic Presentation: Include when electronic presentation of documents is permitted

3. Force Majeure: Include when specific force majeure provisions are required beyond standard ICC rules

4. Language Requirements: Include when documents may be presented in multiple languages or translations are required

5. Counter-Guarantee Provisions: Include when the SBLC is issued under a counter-guarantee structure

6. Automatic Extension Clause: Include when the SBLC may be automatically extended under certain conditions

What schedules should be included in a Performance SBLC?

1. Schedule 1 - Form of Demand: Template for the beneficiary's written demand for payment

2. Schedule 2 - Form of Reduction Certificate: Template for documenting agreed reductions in the SBLC amount

3. Schedule 3 - Form of Transfer Request: Template for requesting transfer of the SBLC if transferable

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

5. Appendix B - Required Supporting Documents: Detailed list and format of all required supporting documentation

6. Appendix C - Authorized Signatories: List of persons authorized to sign demands and certificates

Authors

Alex Denne

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

Jurisdiction

Malaysia

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant Industries

Construction

Infrastructure

Manufacturing

Energy

Oil and Gas

Telecommunications

Engineering Services

Project Development

International Trade

Real Estate Development

Mining

Technology Services

Relevant Teams

Legal

Finance

Treasury

Risk Management

Commercial

Procurement

Trade Finance

Project Management

Contract Administration

Corporate Banking

International Business

Relevant Roles

Chief Financial Officer

Treasury Manager

Contract Manager

Project Manager

Legal Counsel

Trade Finance Manager

Risk Manager

Commercial Director

Finance Director

Banking Relations Manager

Procurement Manager

Company Secretary

Credit Manager

Business Development Manager

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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