An Introduction to Bank Guarantees in English Contracts.
A bank guarantee is a document issued by a bank on behalf of its client, promising that the bank will fulfill the financial obligations specified in the contract, in case the client fails to do so. This article provides a comprehensive template for an English bank guarantee.
1. Parties involved: The names and contact details of the beneficiary (the party in whose favor the guarantee is issued) and the applicant (the party requesting the guarantee) should be clearly stated.
2. Guarantee amount: The exact amount of the guarantee should be mentioned, along with the currency.
3. Purpose of guarantee: Clearly state the reason for which the guarantee is being issued, such as project completion, payment security, or performance assurance.
4. Validity period: Specify the start and end dates of the guarantee. It should be valid for a period sufficient to cover the contract's requirements.
The bank guarantee sets out the obligations and responsibilities of the bank:
1. Payment obligation: The bank guarantees to pay the beneficiary immediately upon receipt of a written demand stating the triggering event.
2. Supporting documents: Mention any supporting documents required for triggering a claim, such as official certificates or invoices.
3. Indemnification: The applicant agrees to indemnify the bank against any losses incurred due to issuing the guarantee.
In case the beneficiary wishes to make a claim, the following procedures need to be followed:
1. Written notice: Notify the bank about the triggering event in writing, specifying the details and attaching supporting documents.
2. Verification process: The bank will assess the validity of the claim and may request additional documentation before making a payment.
3. Payment: If the claim is found to be valid, the bank will make the payment to the beneficiary within the stipulated time frame.
1. Termination: Mention the conditions under which the guarantee can be terminated, such as completion of the contract or mutual agreement.
2. Amendments: Specify that any amendments to the guarantee should be made in writing and signed by all parties involved.
A well-drafted bank guarantee is essential to protect the interests of both parties involved in a contract. It provides financial security and ensures that contractual obligations are fulfilled. Use this template as a starting point, but always seek legal advice to tailor it to your specific requirements.
