Construction Letter Of Credit for Philippines

Construction Letter Of Credit Template for Philippines

This document template provides a comprehensive framework for a Construction Letter of Credit under Philippine law, incorporating requirements from both the Bangko Sentral ng Pilipinas (BSP) regulations and local construction legislation. It establishes the terms and conditions for securing payment obligations in construction projects through a bank-issued credit instrument, ensuring compliance with the General Banking Law of 2000 and relevant BSP circulars. The document includes provisions for progressive drawings based on construction milestones, document submission requirements, and specific conditions that align with Philippine construction industry standards and banking practices.

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What is a Construction Letter Of Credit?

The Construction Letter of Credit is a specialized financial instrument used in the Philippine construction industry to provide payment security for large-scale construction projects. It serves as a guarantee from a bank to make payments to a contractor (beneficiary) on behalf of a project owner (applicant) upon presentation of specified documents proving construction progress. This document type is particularly crucial in the Philippine context, where it helps manage risks in construction projects while ensuring compliance with both the BSP's banking regulations and local construction laws. The letter of credit structure includes specific provisions for staged payments, document requirements, and technical certifications, making it suitable for various construction projects from commercial buildings to infrastructure development. It's commonly used when project owners need to provide contractors with secure payment guarantees, especially for high-value construction contracts.

What sections should be included in a Construction Letter Of Credit?

1. Issuing Bank Details: Complete details of the issuing bank including name, branch, and contact information

2. Beneficiary Information: Full details of the contractor/beneficiary including registration and license numbers

3. Applicant Information: Complete details of the project owner/developer requesting the L/C

4. Credit Amount and Currency: Specification of the total L/C amount and currency of payment

5. Project Identification: Details of the construction project including location and scope

6. Validity Period: Expiry date and last date for presentation of documents

7. Drawing Terms: Conditions and documentation required for drawing under the L/C

8. Payment Schedule: Timeline and milestones for progressive payments under the L/C

9. Required Documents: List of all documents required for each drawing, including certificates and approvals

10. Governing Law Statement: Clear statement of Philippine law governance and applicable regulations

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

1. Transferability Clause: Include when the L/C needs to be transferable to other contractors or suppliers

2. Red Clause Provisions: Include when advance payments are required before construction commencement

3. Back-to-Back L/C Terms: Include when there are multiple contractors or international procurement requirements

4. Force Majeure Provisions: Include specific provisions for natural disasters or other unforeseeable circumstances

5. Green Clause Provisions: Include when warehouse or storage facilities are required during construction

6. Retention Money Provisions: Include when part of the payment needs to be held as retention money

What schedules should be included in a Construction Letter Of Credit?

1. Schedule A - Payment Milestone Chart: Detailed breakdown of construction phases and corresponding payment percentages

2. Schedule B - Document Submission Forms: Standard forms for progress certificates, completion certificates, and other required documentation

3. Schedule C - Technical Specifications: Detailed technical requirements and standards for the construction project

4. Schedule D - Drawing Request Form: Standard format for requesting drawings under the L/C

5. Appendix 1 - Construction Timeline: Detailed project timeline with key milestones and completion dates

6. Appendix 2 - Quality Certification Requirements: List of required quality certifications and inspection requirements

7. Appendix 3 - Bank Authorization Forms: Standard forms for bank processing and authorization

8. Appendix 4 - Document Checklist: Comprehensive checklist of all required documents for each drawing phase

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

Philippines

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Construction

Banking and Finance

Real Estate Development

Infrastructure

Commercial Property

Industrial Development

Public Works

Energy and Utilities

Transportation

Healthcare Facilities

Relevant Teams

Legal

Finance

Construction Management

Project Management

Risk Management

Treasury

Trade Finance

Procurement

Commercial Banking

Corporate Banking

Technical Services

Compliance

Credit Administration

Document Control

Operations

Relevant Roles

Project Finance Manager

Construction Project Manager

Bank Credit Officer

Legal Counsel

Chief Financial Officer

Construction Contract Administrator

Project Director

Risk Management Officer

Treasury Manager

Documentary Credits Specialist

Construction Site Manager

Procurement Manager

Corporate Banking Manager

Development Director

Commercial Banking Officer

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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