Performance Guarantee Bond Template for Saudi Arabia

The Performance Guarantee Bond is a crucial document in Saudi Arabian commercial and construction projects, typically required when a contractor or supplier enters into significant contracts, especially with government entities or large corporations. It serves as a financial security mechanism that protects the beneficiary against the principal's failure to perform their contractual obligations. The document must comply with Saudi law, including the Banking Control Law, SAMA regulations, and Sharia principles. The guarantee amount typically ranges from 5% to 10% of the contract value and remains valid throughout the contract period plus any warranty period. This type of bond is particularly important in government tenders under the Government Tenders and Procurement Law, and in private sector projects where substantial performance risks need to be mitigated.

1. Parties: Identification of the Guarantor (typically a bank), the Principal (the party whose performance is being guaranteed), and the Beneficiary

2. Background: Reference to the underlying contract or agreement being guaranteed, including its date and purpose

3. Definitions: Key terms used in the guarantee bond, including 'Guaranteed Obligations', 'Guarantee Amount', 'Expiry Date', and other relevant terms

4. Guarantee: The core guarantee provision, specifying the amount and scope of the guarantee

5. Duration: The validity period of the guarantee, including commencement and expiry dates

6. Conditions for Payment: Specific circumstances under which the guarantee can be called upon and the process for making claims

7. Payment Obligations: Details of how and when payments will be made under the guarantee

8. Reduction and Release: Circumstances under which the guarantee amount may be reduced and conditions for release of the guarantee

9. Governing Law and Jurisdiction: Specification of Saudi law as governing law and relevant jurisdiction for disputes

10. Notices: Process and requirements for serving notices under the guarantee