The Direct Bank Guarantee is a crucial financial instrument in South African commercial practice, commonly used in various business contexts including construction contracts, tender submissions, and trade transactions. It represents a bank's irrevocable commitment to pay a specified sum to a beneficiary upon receipt of a compliant demand, without reference to the underlying commercial relationship between the principal and the beneficiary. The guarantee must comply with South African banking regulations, particularly the Banks Act 94 of 1990 and the Financial Sector Regulation Act 9 of 2017. This document is typically required when a party needs to provide security for their obligations but prefers not to tie up cash resources, or when required by regulatory or contractual requirements. The Direct Bank Guarantee provides beneficiaries with a secure, liquid form of security, backed by the creditworthiness of a South African banking institution.
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1. Parties: Identification of the Bank (Guarantor), the Beneficiary, and the Principal (party on whose behalf the guarantee is issued)
2. Background: Context of the guarantee, including reference to the underlying transaction or obligation
3. Definitions: Key terms used in the guarantee, including 'Guaranteed Sum', 'Expiry Date', and specific defined terms related to the underlying transaction
4. Guarantee: Core section detailing the bank's undertaking to pay, including the guaranteed amount and currency
5. Conditions for Payment: Specific conditions under which the guarantee can be called upon and the process for making a claim
6. Duration and Expiry: Term of the guarantee, including start date, expiry date, and any automatic extension provisions
7. Payment Terms: Details of how and when payment will be made upon valid demand, including payment period and method
8. Bank's Rights and Obligations: Specific provisions regarding the bank's position, including right to investigate claims and limitation of liability
9. Governing Law and Jurisdiction: Specification of South African law as governing law and jurisdiction for disputes
10. Execution: Signature blocks and execution formalities
1. Counter-Indemnity: Required when the Principal provides indemnity to the Bank for any payments made under the guarantee
2. Assignment and Transfer: Include when transfer or assignment of the guarantee rights needs to be addressed
3. Force Majeure: Include when specific force majeure provisions are required, particularly for international guarantees
4. Currency Provisions: Required for guarantees involving foreign currency or cross-border transactions
5. Multiple Beneficiaries: Include when the guarantee is issued in favor of multiple beneficiaries
6. Step-In Rights: Include when third parties may have rights to step into the position of the beneficiary
7. Reduction Clauses: Include when the guarantee amount may be reduced over time or upon specific events
1. Form of Demand: Template for making a valid demand under the guarantee
2. Supporting Documents: List and copies of documents referenced in the guarantee
3. Payment Schedule: If applicable, schedule of guarantee amount reductions or variations
4. Underlying Contract Extract: Relevant excerpts from the underlying contract giving rise to the guarantee
5. Bank's Standard Terms and Conditions: Standard terms applicable to all guarantees issued by the bank
Authors
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
International Trade
Real Estate Development
Mining and Resources
Manufacturing
Government and Public Sector
Energy and Utilities
Telecommunications
Retail and Commercial
Relevant Teams
Legal
Finance
Treasury
Risk Management
Procurement
Commercial Operations
Contract Administration
Corporate Banking
Project Management
Credit Administration
Relevant Roles
Chief Financial Officer
Finance Director
Treasury Manager
Contract Manager
Project Manager
Legal Counsel
Commercial Director
Risk Manager
Banking Relationship Manager
Procurement Manager
Company Secretary
Financial Controller
Credit Manager
Business Development Director
Operations Manager
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