Bank Guarantee Performance Bond Template for Malaysia

The Bank Guarantee Performance Bond is a crucial financial instrument in Malaysian commercial transactions, particularly in construction and infrastructure projects. It provides security to project owners by having a bank guarantee the performance obligations of contractors or service providers. This document is typically required when entering into significant commercial contracts where the performance risk needs to be mitigated. The bond, governed by Malaysian law including the Financial Services Act 2013 and Contracts Act 1950, contains specific terms regarding the guaranteed sum, validity period, and conditions for demand. It serves as an independent obligation of the bank, meaning the bank must pay upon a valid demand regardless of disputes in the underlying contract. The document is particularly important in government contracts and large-scale private projects where performance security is mandatory.

1. Parties: Identifies the three key parties: the Bank (Guarantor), the Principal (Party whose performance is being guaranteed), and the Beneficiary

2. Background: References the underlying contract or agreement requiring the performance bond and explains the context for the guarantee

3. Definitions: Defines key terms used in the bond including 'Guaranteed Sum', 'Expiry Date', and other relevant terms

4. Bank's Guarantee: The core guarantee provision where the bank commits to pay the specified sum upon demand

5. Conditions for Demand: Specifies the circumstances and conditions under which the beneficiary can make a claim

6. Form of Demand: Details the required format and content of any demand made under the guarantee

7. Payment Terms: Specifies how and when payment will be made following a valid demand

8. Validity Period: States the duration of the guarantee and any conditions for extension

9. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and establishes jurisdiction