Advance Payment Guarantee Letter Template for Saudi Arabia

The Advance Payment Guarantee Letter is a crucial document in Saudi Arabian business transactions, particularly in construction, infrastructure, and government projects. It is required when a project owner or employer provides advance payment to a contractor or supplier to initiate work or secure materials. The guarantee, issued by a bank, protects the advance payment by ensuring its repayment if the contractor fails to perform. The document must comply with Saudi Arabian banking regulations, SAMA guidelines, and Shariah principles, making it distinct from conventional guarantees in other jurisdictions. It typically represents 10-20% of the contract value and remains valid until the advance payment is fully amortized or the contract obligations are fulfilled. The guarantee letter includes specific provisions for enforcement, validity periods, and claim procedures, providing security for large-scale projects and government contracts in Saudi Arabia.

1. Bank Details and Reference Number: Letterhead with issuing bank's details and unique guarantee reference number

2. Date and Place of Issue: Clear statement of when and where the guarantee was issued

3. Beneficiary Details: Full name and address of the party receiving the guarantee

4. Project/Contract Reference: Details of the underlying contract or project for which the advance payment is being made

5. Guarantee Amount: The specific amount being guaranteed, in both numbers and words

6. Purpose of Guarantee: Clear statement that this is an advance payment guarantee and its specific purpose

7. Terms of Enforcement: Conditions under which the guarantee can be called upon

8. Validity Period: Start and end dates of the guarantee, including any automatic extension conditions

9. Governing Law Declaration: Statement that the guarantee is governed by Saudi law and Shariah principles

10. Bank's Undertaking: The bank's commitment to pay upon first demand without contestation