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Bonds or Gurantees

Exception/deviation by Tenderer

Client position

Provision of guarantees from banks that are not from the Client specified list of banks

Such deviation should be examined with the finance department as, the rating of certain banks and the laws under which banks operate determines to a large extent if the guarantee would get honored on first demand made on the bank.

Client’s specifying expiry date of a guarantee linked to a certain milestone.

Due to the fact that banks are not a party to the Contract, banks normally do not consider reference to milestones and see it as being open ended and hence are reluctant to issue a guarantee with a firm expiry date.

Exception could be accepted and a fixed expiry date inserted subject to validity extension of the guarantee at Clients sole request.

Tenderer requesting to substitute a bank guarantee with a parent company guarantee.

Decision should be made on commercial consideration depending on Tenderer’s credentials. However if accepted, a corresponding commercial advantage should be taken away from such Tenderer while performing the commercial evaluation.

Tenderers take exception to the wordings that make the guarantee unconditional and irrevocable.

If the Clients purpose of obtaining a guarantee is based on an assessment that a certain financial deterrent to ill performance is required in a Contract then it should remain unconditional, irrevocable and on first demand. Without recourse to any reasons of default, the bank should honor a claim against the guarantee.

Advance Bank Guarantees: Tenderers request for adjustment of the bond value to the extent of work done.

This should be generally acceptable as the Tenderers could pass on the associated commercial benefit to the Client with no dilution in the security requirement to Client.

Similarly, in case of there being large variations to the Contract scope, the performance bond value could also be adjusted accordingly.

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