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Performance Bond Agreement

Performance Bond Agreement Template for Saudi Arabia

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Key Requirements PROMPT example:

Performance Bond Agreement

"I need a Performance Bond Agreement for a Saudi government infrastructure project worth 50 million SAR, where National Commercial Bank will act as guarantor for our construction company, with the bond validity period running from March 1, 2025, to December 31, 2025."

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Document background
The Performance Bond Agreement is a crucial document in Saudi Arabian commercial and construction projects, required by law for most government contracts and commonly used in private sector projects. It serves as a risk mitigation tool where a bank or financial institution guarantees the performance of a contractor's obligations to a project owner. The document must comply with Saudi Arabian law, including Sharia principles and SAMA regulations, typically guaranteeing between 5% to 10% of the contract value. This type of agreement is particularly important in the Saudi market due to the scale of infrastructure and development projects, and the government's emphasis on secure contract performance. The agreement specifies the conditions under which the bond can be called, claim procedures, and the rights and obligations of all parties involved.
Suggested Sections

1. Parties: Identifies the Principal (Contractor), Beneficiary (Project Owner), and Guarantor (Bank/Financial Institution)

2. Background: Describes the underlying contract/project and the requirement for the performance bond

3. Definitions: Defines key terms used throughout the agreement

4. Bond Amount: Specifies the guaranteed sum and currency

5. Scope of Guarantee: Details the extent and nature of the guarantee provided

6. Duration and Validity: Specifies the effective period of the bond and expiry conditions

7. Conditions for Claim: Sets out circumstances under which the bond can be called upon

8. Claim Procedure: Details the process for making and handling claims

9. Obligations of the Principal: Lists the contractor's duties and responsibilities

10. Rights of the Beneficiary: Outlines the project owner's entitlements under the bond

11. Governing Law and Jurisdiction: Specifies Saudi law as governing law and relevant courts

12. Notices: Details how formal communications should be made between parties

13. Execution: Signature blocks and execution formalities

Optional Sections

1. Counter Guarantee: Required when there is a separate counter-guarantee arrangement between the Principal and Guarantor

2. Assignment: Include when the bond needs to be transferable or when assignment rights need to be restricted

3. Multiple Beneficiaries: Required when the project has more than one owner/beneficiary

4. Step-In Rights: Include for large projects where lenders may require direct rights

5. Partial Claims: Include when partial claims on the bond amount are to be permitted

6. Language: Required when the agreement needs to be bilingual (Arabic/English)

7. Force Majeure: Include when specific force majeure provisions need to be addressed

8. Amendments: Include when specific procedures for amendments need to be detailed

Suggested Schedules

1. Form of Demand: Template for making a claim under the bond

2. Underlying Contract Details: Summary or extract of the main contract requiring the performance bond

3. Project Specifications: Key details of the project being guaranteed

4. Authorization Documents: Corporate authorizations and powers of attorney

5. Bank Details: Payment and banking information for claims processing

6. Compliance Certificates: Required regulatory or Sharia compliance 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

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Agreement
Applicable Law
Authorized Representative
Beneficiary
Bond Amount
Business Day
Claim
Claim Notice
Commencement Date
Confidential Information
Contract
Default
Demand
Effective Date
Expiry Date
Force Majeure
Governing Law
Guarantee
Guarantor
Liability
Material Adverse Effect
Notice
Obligations
Parties
Performance Bond
Principal
Project
Reference Number
Related Rights
Required Currency
Saudi Arabian Law
Security
Sharia Principles
Specified Amount
Underlying Contract
Valid Claim
Working Hours
Clauses
Interpretation
Representations and Warranties
Bond Amount and Scope
Duration and Validity
Payment Obligations
Claims and Demands
Enforcement
Counter-Indemnity
Assignment and Transfer
Amendments and Variations
Notices
Confidentiality
Force Majeure
Dispute Resolution
Governing Law and Jurisdiction
Severability
Entire Agreement
Language
Compliance with Laws
Sharia Compliance
Bank's Rights and Obligations
Principal's Undertakings
Beneficiary's Rights
Default Events
Termination
Costs and Expenses
Waiver
Third Party Rights
Multiple Originals
Authorization and Capacity
Relevant Industries

Construction

Infrastructure Development

Energy

Oil & Gas

Manufacturing

Real Estate Development

Government Contracts

Engineering

Telecommunications

Healthcare Infrastructure

Transportation

Mining

Relevant Teams

Legal

Finance

Commercial

Procurement

Risk Management

Treasury

Operations

Project Management

Compliance

Business Development

Relevant Roles

Project Manager

Contract Manager

Legal Counsel

Finance Director

Commercial Director

Risk Manager

Treasury Manager

Construction Manager

Procurement Manager

Business Development Director

Operations Director

Chief Financial Officer

General Counsel

Bank Relationship Manager

Compliance Officer

Industries
Islamic Sharia Law: The fundamental source of law in Saudi Arabia that governs all contracts and commercial transactions, ensuring compliance with Islamic principles
Government Tenders and Procurement Law (Royal Decree No. M/128): Regulates government procurement and specifies requirements for performance bonds in government contracts, including bond percentages and conditions
Saudi Arabian Monetary Authority (SAMA) Banking Control Law: Regulates banking activities including the issuance of performance bonds and bank guarantees
Commercial Courts Law (Royal Decree No. M/93): Governs commercial disputes and enforcement of commercial contracts, including performance bonds
Civil Transactions Regulations: Provides general principles for guarantees, securities, and contractual obligations in Saudi Arabia
Saudi Commercial Law (Royal Decree No. M/32): Contains provisions relating to commercial contracts and securities, including requirements for performance guarantees
Enforcement Law (Royal Decree No. M/53): Governs the enforcement of commercial papers, securities, and judgments, including the execution of performance bond claims
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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