The Contra Bank Guarantee is a specialized financial instrument used in Malaysian banking practice when two parties require mutual guarantees, often in international trade or large commercial transactions. This document type is particularly relevant when a local bank needs to issue a guarantee in favor of an overseas beneficiary, backed by a corresponding guarantee from a foreign bank, or vice versa. The Contra Bank Guarantee establishes the terms, conditions, and mechanisms for both guarantees, ensuring compliance with Malaysian banking regulations and Bank Negara Malaysia requirements. It's commonly used in international contracts, construction projects, and trade finance where parties seek reciprocal security arrangements. The document includes detailed provisions for activation, demand procedures, payment terms, and enforcement mechanisms, all structured within the Malaysian legal framework.
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1. Parties: Identifies all parties involved - the issuing bank, the beneficiary, and the principal
2. Background: Explains the context of the contra guarantee and references the original guarantee against which this is being issued
3. Definitions: Defines key terms used throughout the guarantee document
4. Guarantee Amount and Currency: Specifies the maximum amount of the guarantee and the currency
5. Nature and Scope of Guarantee: Details the specific obligations being guaranteed and the relationship with the original guarantee
6. Duration and Validity: Specifies the effective date, expiry date, and any automatic extension conditions
7. Conditions for Demand: Sets out the circumstances and procedures under which a demand can be made
8. Payment Terms: Specifies how and when payment must be made upon valid demand
9. Reduction and Release: Conditions under which the guarantee amount may be reduced or the guarantee released
10. Assignment and Transfer: Provisions regarding whether the guarantee can be assigned or transferred
11. Governing Law and Jurisdiction: Specifies Malaysian law as governing law and defines jurisdiction for disputes
1. Counter-Indemnity: Required when there's a separate counter-indemnity arrangement from the principal
2. Tax Provisions: Include when there are specific tax implications or withholding requirements
3. Force Majeure: Optional clause defining circumstances beyond control that might affect the guarantee
4. Language: Required only if the document might be translated or used in multiple languages
5. Electronic Presentation: Include when electronic presentation of documents is permitted
6. Anti-Money Laundering Compliance: Required for high-value guarantees or when dealing with certain jurisdictions
7. Multiple Banking Facilities: Include when the guarantee is part of a larger banking facility arrangement
1. Schedule 1 - Form of Demand: Standard format for making a demand under the guarantee
2. Schedule 2 - Original Guarantee Details: Copy or details of the original guarantee against which this contra guarantee is issued
3. Schedule 3 - Fee Schedule: Details of bank charges, fees, and commission applicable
4. Appendix A - Supporting Documents: List of required supporting documents for guarantee activation or demand
5. Appendix B - Authorized Signatories: List of authorized signatories and specimen signatures if required
6. Appendix C - Communication Details: Contact details and communication protocols for all parties
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