Guaranty Fee Agreement Template for Saudi Arabia

The Guaranty Fee Agreement is essential in commercial and financial transactions in Saudi Arabia where one party provides a guarantee in favor of another for a fee. This document is typically used when banks, financial institutions, or corporate entities issue guarantees for various commercial purposes, including project bids, performance obligations, or payment securities. The agreement must carefully balance commercial requirements with Islamic finance principles, particularly regarding the structure of fees to ensure Sharia compliance. It includes detailed provisions for fee calculation, payment mechanisms, and the rights and obligations of both parties. The document is subject to Saudi Arabian law and must comply with Saudi Central Bank (SAMA) regulations, the Commercial Courts Law, and Islamic Sharia principles. It's particularly important in project finance, international trade, and large commercial transactions where guarantees are required as security or performance assurance.

1. Parties: Identification of the Guarantor and the Beneficiary, including full legal names and addresses

2. Background: Context of the guarantee arrangement and the basis for the fee agreement

3. Definitions: Key terms used throughout the agreement, including 'Guarantee', 'Guarantee Fee', 'Underlying Agreement', and other relevant terms

4. Fee Structure: Details of the guarantee fee, calculation method, and compliance with Sharia principles

5. Payment Terms: Timing and method of fee payments, including payment schedule and currency

6. Obligations of the Parties: Specific duties and responsibilities of both the Guarantor and Beneficiary

7. Term and Termination: Duration of the agreement and circumstances for early termination

8. Representations and Warranties: Standard declarations by both parties regarding their capacity and authority

9. Sharia Compliance: Specific provisions ensuring the agreement complies with Islamic law principles

10. Governing Law and Jurisdiction: Application of Saudi law and designation of competent courts

11. Notices: Communication procedures between parties

12. Entire Agreement: Integration clause and relationship to other documents