Payment Guarantee Agreement Template for Malaysia

The Payment Guarantee Agreement is a critical financial security instrument used in Malaysian business transactions when one party needs assurance of payment from another. This document is commonly utilized in various commercial contexts, from large-scale project financing to regular supply contracts, where creditworthiness or payment security is a concern. The agreement must comply with Malaysian legal requirements, including the Contracts Act 1950, Financial Services Act 2013, and Stamp Act 1949. It typically includes comprehensive details about the guaranteed obligations, demand procedures, enforcement mechanisms, and the specific circumstances under which the guarantee can be called upon. The document is particularly important in situations where there's a need to mitigate payment risk or when required by regulatory or commercial requirements.

1. Parties: Identifies the Guarantor, the Beneficiary (guaranteed party), and the Principal Debtor whose obligations are being guaranteed

2. Background: Recitals explaining the context of the guarantee, including reference to the underlying agreement or obligation being guaranteed

3. Definitions and Interpretation: Defines key terms used in the agreement and sets out interpretation principles

4. Guarantee and Indemnity: Core section establishing the guarantee obligations, including the scope and nature of the guarantee

5. Payment Obligations: Details of the guaranteed amounts, payment mechanisms, and timing requirements

6. Demands and Payments: Procedures for making demands under the guarantee and how payments should be made

7. Continuing Security: Establishes that the guarantee is continuing and covers all obligations under the primary agreement

8. Representations and Warranties: Key statements and assurances given by the Guarantor

9. Preservation of Rights: Provisions maintaining the Beneficiary's rights in various circumstances

10. Default and Enforcement: Consequences of default and enforcement mechanisms available to the Beneficiary

11. Costs and Expenses: Allocation of costs related to the guarantee and its enforcement

12. Notices: Communication procedures between parties

13. Governing Law and Jurisdiction: Confirms Malaysian law as governing law and specifies jurisdiction for disputes