Bank guarantee means any signed undertaking, however named or described, providing for payment on presentation of a complying demand.
In big projects such as building a factory plant, supply of complicated machineries and other capital goods, it is often determined that the buyer may keep around 10% of the contract amount for a further period of time even after the supplier delivered the goods or completed the assembly, for example 18 months after the production plant up and running.
The supplier may want to have the full contract amount before the end of this extended period (in the example given above, 18 months) by issuing a retention guarantee that covers the amount that would otherwise be withheld by the buyer.
The supplier will request its bank to issue a retention guarantee in favor of the buyer.
Once the buyer receives the retention guarantee he will transfer the amount of the guarantee amount direct to the supplier by T/T payment.
A retention money guarantee sample will be provided on this page.
The example you can find on this page is prepared as per ICC sample demand guarantee forms.
Retention Money Guarantee Sample
Beneficiary : State Property Committee Date : 31.August.2014
55, Uzbekistanskaya str.,
Retention Money Guarantee No. : 2014/0015
We have been informed that Advanced Manufacturing Systems Corporation, Hwaseong, South Korea (hereinafter called “the principal”), has entered into contract No. 20140831 dated 08.August.2014 with you, for the supply of Semiconductor Machinery Manufacturing.
Furthermore we understand that, according to the conditions of the contract, retention money in the sum of 50.000,00 covering the Principal’s warranty obligations will be released against a retention money guarantee.
At the request of the principal, we KLB Bank hereby irrevocably undertake to pay you any sum or sums not exceeding in total an amount of 50.000,00 USD (say Fifty Thousand USD) upon receipt by us of your first demand in writing and your written statement stating:
that the principal is in breach of his obligations under the underlying contract, and
the respect in which the principal is in breach.
Your demand for payment must also be accompanies by the following documents:
Copy of commercial invoice
Proof of identity certificate issued and signed by our branch in beneficiary’s country or else one of our corresponding bank’s located in beneficiary’s country stating that the bank has verified beneficiary’s signature(s) appearing on the first demand of payment.
It is a condition for any claim and payment under this guarantee to be made that the advance payment referred to above must have been received the principal on his account number 444333222 at KLB Bank (Head Office) South Korea.
This guarantee shall expire on 30.December.2014 at the latest.
Consequently any demand for payment under it must be received by us at this office on or before that date.
This guarantee is subject to the Uniform Rules for Demand Guarantees, ICC publication No. 758.