The On Demand Bank Guarantee is a critical financial instrument in Malaysian commercial practice, used to secure various business obligations including tender submissions, performance obligations, advance payments, and warranty obligations. It provides beneficiaries with readily accessible security, requiring only a compliant demand for payment without needing to prove default or loss. The guarantee must comply with Malaysian banking regulations, particularly the Financial Services Act 2013, and follows established banking practices. This document type is especially crucial in projects where parties need strong payment security, such as construction contracts, supply agreements, and government tenders. The guarantee's on-demand nature means the bank must pay upon receiving a compliant demand, making it a powerful tool for managing commercial risk.
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1. Parties: Identifies the Bank (Guarantor), the Applicant (Principal), and the Beneficiary
2. Background: Brief context of the underlying transaction requiring the guarantee
3. Definitions: Key terms used in the guarantee including Guarantee Amount, Expiry Date, and Demand
4. Guarantee and undertaking: Core section stating the bank's unconditional undertaking to pay upon demand
5. Amount of Guarantee: Specifies the maximum amount guaranteed and currency
6. Demand Requirements: Format and procedure for making a valid demand under the guarantee
7. Expiry: Terms regarding the expiry date and conditions for guarantee termination
8. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and jurisdiction for disputes
9. Assignment: Prohibition or conditions for assignment of the guarantee
1. Reduction Clause: Used when the guarantee amount may be reduced over time or upon certain events
2. Extension Mechanism: Include when the guarantee may need to be extended beyond initial expiry
3. Multiple Demands: Needed when clarifying whether multiple demands are permitted up to the guarantee amount
4. Counter Indemnity: Used when a separate counter-indemnity is not executed and needs to be included in main guarantee
5. Language Clause: Required when the guarantee may be issued in multiple languages
6. Force Majeure: Optional clause addressing circumstances preventing guarantee performance
1. Schedule 1: Form of Demand: Template for making a valid demand under the guarantee
2. Schedule 2: Bank Account Details: Beneficiary's account details for payment under the guarantee
3. Schedule 3: Specimen Signatures: Authorized signatures for making demands under the guarantee
4. Schedule 4: Underlying Contract Details: Key details of the contract or obligation being guaranteed
Relevant legal definitions
Clauses
Relevant Industries
Banking and Financial Services
Construction and Infrastructure
Manufacturing
International Trade
Energy and Utilities
Real Estate Development
Government and Public Sector
Telecommunications
Oil and Gas
Mining
Relevant Teams
Legal
Finance
Treasury
Procurement
Commercial
Risk Management
Project Management
Credit
Compliance
Corporate Secretariat
Relevant Roles
Chief Financial Officer
Treasury Manager
Finance Director
Project Manager
Contract Manager
Legal Counsel
Risk Manager
Commercial Director
Procurement Manager
Banking Relationship Manager
Credit Manager
Company Secretary
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