The Retention Bank Guarantee is a crucial document in South African construction and development projects, designed to replace traditional cash retention mechanisms. It is typically used when a contractor seeks to improve their cash flow position while still providing the employer with necessary security. The guarantee amount usually represents 5-10% of the contract value, corresponding to the retention amount that would otherwise be held in cash. The document must comply with South African banking regulations, construction industry standards, and the Construction Industry Development Board (CIDB) guidelines. A Retention Bank Guarantee becomes particularly relevant during the defects liability period of construction projects and includes specific provisions for claim procedures, validity periods, and release conditions. This type of guarantee is widely recognized in the South African construction industry and is often preferred over cash retention by both contractors and employers.
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1. Parties: Identifies the Bank (Guarantor), the Contractor (Principal), and the Employer (Beneficiary)
2. Background: References the underlying construction contract and explains the purpose of the retention guarantee
3. Definitions: Defines key terms used in the guarantee including 'Guaranteed Sum', 'Expiry Date', and 'Underlying Contract'
4. Guarantee: The bank's primary undertaking to pay the guaranteed sum under specified conditions
5. Amount of Guarantee: Specifies the maximum amount of the guarantee, typically expressed both in numbers and words
6. Conditions of Payment: Details the conditions under which the guarantee can be called upon and the process for making a claim
7. Duration and Expiry: Specifies when the guarantee becomes effective and when it expires
8. Bank's Rights and Obligations: Outlines the extent and limitations of the bank's obligations under the guarantee
9. Governing Law and Jurisdiction: Confirms South African law as governing law and specifies jurisdiction for disputes
10. Notices: Specifies how and where notices must be delivered to all parties
1. Assignment: Include when the guarantee needs to be transferable or when assignment needs to be specifically prohibited
2. Reduction Clause: Include when the guarantee amount can be reduced over time or upon certain milestones
3. Language Declaration: Include when the guarantee might be used internationally or when translations might be required
4. Force Majeure: Include when specific force majeure provisions are required beyond standard law
5. Multiple Beneficiaries: Include when there is more than one beneficiary of the guarantee
6. Counter-Indemnity Reference: Include when there is a separate counter-indemnity agreement with the contractor
1. Schedule A - Form of Demand: Template for making a claim under the guarantee
2. Schedule B - Project Details: Details of the underlying construction project and contract
3. Schedule C - Payment Instructions: Banking details and payment procedures for claim settlements
4. Appendix 1 - Copy of Underlying Contract Extract: Relevant extract from the construction contract referring to retention requirements
5. Appendix 2 - Authority Documentation: Proof of authority of signatories
Relevant legal definitions
Beneficiary
Bank
Contract Price
Contractor
Defects Liability Period
Demand
Effective Date
Employer
Expiry Date
Guaranteed Sum
Guarantor
Interest Rate
Notice
Original Guarantee
Parties
Payment Date
Principal
Project
Retention Amount
Retention Percentage
Site
Underlying Contract
Works
Working Day
Valid Claim
Warranty Period
Practical Completion
Final Completion
Completion Certificate
Business Hours
Bank
Contract Price
Contractor
Defects Liability Period
Demand
Effective Date
Employer
Expiry Date
Guaranteed Sum
Guarantor
Interest Rate
Notice
Original Guarantee
Parties
Payment Date
Principal
Project
Retention Amount
Retention Percentage
Site
Underlying Contract
Works
Working Day
Valid Claim
Warranty Period
Practical Completion
Final Completion
Completion Certificate
Business Hours
Clauses
Parties
Interpretation
Definitions
Guarantee Issuance
Guarantee Amount
Duration and Validity
Payment Obligations
Claim Procedures
Demand Requirements
Reduction of Liability
Expiry Conditions
Assignment and Transfer
Bank's Rights
Force Majeure
Notices
Governing Law
Jurisdiction
Dispute Resolution
Amendments
Severability
Entire Agreement
Counterparts
Authority
Compliance with Laws
Anti-corruption
Representations and Warranties
Interpretation
Definitions
Guarantee Issuance
Guarantee Amount
Duration and Validity
Payment Obligations
Claim Procedures
Demand Requirements
Reduction of Liability
Expiry Conditions
Assignment and Transfer
Bank's Rights
Force Majeure
Notices
Governing Law
Jurisdiction
Dispute Resolution
Amendments
Severability
Entire Agreement
Counterparts
Authority
Compliance with Laws
Anti-corruption
Representations and Warranties
Relevant Industries
Construction
Infrastructure Development
Real Estate
Banking and Financial Services
Engineering
Mining
Commercial Property Development
Industrial Development
Public Sector Construction
Energy and Utilities
Relevant Teams
Legal
Finance
Construction
Project Management
Commercial
Risk Management
Treasury
Procurement
Contract Administration
Corporate Banking
Relevant Roles
Project Manager
Construction Manager
Contract Manager
Financial Manager
Bank Relationship Manager
Quantity Surveyor
Construction Director
Legal Counsel
Risk Manager
Treasury Manager
Chief Financial Officer
Commercial Director
Project Director
Development Manager
Finance Director
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