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The Retention Bank Guarantee is a crucial document in Saudi Arabian construction and development projects, designed to replace the traditional practice of holding back a percentage of payment (typically 5-10%) as retention money. This type of bank guarantee, governed by Saudi Arabian law and regulated by SAMA, provides security to the employer while improving the contractor's cash flow. It is commonly used when a contractor wishes to receive their full payment while still providing the employer with security during the defects liability period. The guarantee must comply with Shariah principles and typically remains valid until the issuance of the final acceptance certificate or the expiry of the defects liability period.

1. Document Title and Reference: Clear identification of the document as a Retention Bank Guarantee, including guarantee number and date

2. Parties: Identification of all parties: Bank (Guarantor), Contractor (Principal), and Employer (Beneficiary), including full legal names and addresses

3. Underlying Contract Reference: Details of the main contract between the Contractor and Employer, including contract number, date, and project description

4. Guarantee Amount: The specific amount of the retention guarantee in both numbers and words, including currency

5. Purpose of Guarantee: Clear statement of the guarantee's purpose regarding retention money and the specific obligations being secured

6. Validity Period: Explicit start and end dates of the guarantee, including conditions for extension

7. Terms of Payment: Conditions under which the bank will make payment, including required documentation and notice period

8. Claim Process: Detailed procedure for making claims under the guarantee

9. Reduction Provisions: Terms for progressive reduction of the guarantee amount, if applicable

10. Governing Law: Statement confirming Saudi Arabian law as governing law and compliance with Shariah principles