Turkey: Supplementary Memorandum about Letters of Guarantee

Last Updated: 25 November 2004
Article by Vural Günal

The sample formats of the letters of guarantee enclosed to our "Memorandum on the Communiqué of the Ministry of Finance About Letters of Guarantee" which was originally issued in January 2003 and then revised upon the General Communiqué, no. 15, of the Republic of Turkey, the Ministry of Finance, the Accountancy General Directorate, published in the 1st Repeated Edition of the Official Gazette on February 20, 2004, have been once more replaced by the text formats published in the Official Gazette on June 08, 2004.

1. The sample formats of:

  • Temporary Letter of Guarantee (Bid Bond)
  • Advance Payment Letter of Guarantee and
  • Final Letter of Guarantee (Performance Bond)

given in the Regulation Amending the Implementation Regulation on Bid Tenders for Purchase of Goods, and

2. the sample formats of:

  • Temporary Letter of Guarantee (Bid Bond)
  • Advance Payment Letter of Guarantee and
  • Final Letter of Guarantee (Performance Bond)

given in the Regulation Amending the Implementation Regulation on Bid Tenders for Purchase of Services

are identical both in form and in contents, and now and therefore, sample formats of these three types of letters of guarantee are enclosed hereto for your information for use if and when required.

Faithfully yours,

 

Vural Günal

Legal Advisor

 

Encl.: Formats of 3 letters of guarantee

*****

TEMPORARY LETTER OF GUARANTEE

(BID BOND)

DATE: _ _ / _ _ / _ _ _ _
NUMBER:......................

Whereas, ............ (name of the bank or special financial institution) stands as a guarantor for payment of the amount of TL ..............1 (amount of the bid bond) of the temporary letter of guarantee which the bidder ........... (name of the Bidder), intending to submit a bid for the project of .................. (name of the project) let for contract by your Administration, is obliged and liable to submit pursuant to the provisions of the bidding documentation and of the 4734 Act;

Now and therefore, we, the undersigned, as the responsible officers and authorized signatories of ........................ (name of the bank or special financial institution) hereby declare, warrant, agree and undertake in the account and name of our bank/special financial institution that if and when the events justifying realization and crediting of the temporary letter of guarantee as income occur within the frame of the provisions of the bidding documentation and the Public Bid Tenders Act 4734, our bank/ special financial institution will pay to your Administration or to its order the above cited amount, together with legal interests to be accrued thereon from the date of demand to the date of actual payment, in cash and in full, without delay and immediately upon your first written demand, without any protest or court judgment or consent of the said bidder and irrespective of any dispute that may arise between the bidder and your Administration and irrespective of the outcomes and legal results thereof.

This Letter of Guarantee will remain valid until .../.../....2 and will become null and void if no written payment demand is received by our bank/special financial institution from you on or before the said date.

If and when this Letter of Guarantee is paid, the Letter of Guarantee amount will be paid to you as ....................3.

(Name of the bank or special financial institution)

......... Branch

(Name of the branch of the issuing bank or special financial institution)

Name, position and signature of the authorized officers of

(Name of the bank or special financial institution)

 

P.S. a) In the letters of guarantee to be issued against a counter-guarantee of foreign banks or similar other foreign crediting institutions, both the name of the foreign bank or crediting institution issuing the counter-guarantee will be given, and it will be stated that the letter of guarantee is based on a counter-guarantee. If the bid/payment currency is Turkish Lira, the letters of guarantee to be issued against a counter-guarantee will also be issued in Turkish Lira.

b) If the article "Currency of Bids and Payments" of the Administrative Specifications allows bidding in foreign currency or foreign currencies, the bidders will issue their letters of guarantee in the bid currency.

*****

FINAL LETTER OF GUARANTEE

(PERFORMANCE BOND)

DATE: _ _ / _ _ / _ _ _ _
NUMBER:......................

Whereas, ............ (name of the bank or special financial institution) stands as a guarantor for payment of the amount of TL ..............4 (amount of the performance bond) of the final letter of guarantee which the contractor ....................... (name of the Contractor), who is awarded the contract for the project of ......................... (name of the project) as a result of the bid tender organized by your Administration, is obliged and liable to submit pursuant to the provisions of the contract and the bidding documentation and the 4734 Act and the 4735 Act;

Now and therefore, we, the undersigned, as the responsible officers and authorized signatories of ....... (name of the bank or special financial institution) hereby declare, warrant, agree and undertake in the account and name of our bank/special financial institution that if and when the Contractor fails to perform all or some of its contractual obligations in accordance with the provisions of the contract and the bidding documentation and the aforementioned Acts, our bank/special financial institution will pay to your Administration the above cited amount, together with legal interests to be accrued thereon from the date of demand to the date of actual payment, in cash and in full, without delay and immediately upon your first written demand, without any protest or court judgment or consent of the said contractor and irrespective of any dispute that may arise between the contractor and your Administration and irrespective of the outcomes and legal results thereof.

This Letter of Guarantee will remain valid until .../.../....5 and will become null and void if no written payment demand is received by our bank/special financial institution from you on or before the said date.

If and when this Letter of Guarantee is paid, the Letter of Guarantee amount will be paid to you as ....................6.

(Name of the bank or special financial institution)

......... Branch

(Name of the branch of the issuing bank or special financial institution)

Name, position and signature of the authorized officers of

(Name of the bank or special financial institution)

P.S. a) In the letters of guarantee to be issued against a counter-guarantee of foreign banks or similar other foreign crediting institutions, both the name of the foreign bank or crediting institution issuing the counter-guarantee will be given, and it will be stated that the letter of guarantee is based on a counter-guarantee. If the bid/payment currency is Turkish Lira, the letters of guarantee to be issued against a counter-guarantee will also be issued in Turkish Lira.

b) If the article "Currency of Bids and Payments" of the Administrative Specifications allows bidding in foreign currency or foreign currencies, the bidders will issue their letters of guarantee in the bid currency.

*****

ADVANCE PAYMENT LETTER OF GUARANTEE

DATE: _ _ / _ _ / _ _ _ _

NUMBER:......................

Whereas, ............. (name of the bank or special financial institution) stands as a guarantor for repayment of the amount of TL ..........7 (amount of the advance payment letter of guarantee) of the advance payment letter of guarantee which the contractor .................. (name of the contractor), being awarded the contract of .................. (name of the contract) as a result of the competitive bidding organized by your Administration, is obliged and liable to submit pursuant to the provisions of the bidding documentation and the contract and of the 4734 Act and the 4735 Act;

Now and therefore, we, the undersigned, as the responsible officers and authorized signatories of ................. (name of the bank/special financial institution) hereby declare, warrant, agree and undertake in the account and name of our bank/special financial institution that if and when this advance sum is required to be repaid to your Administration for any reason whatsoever, our bank/special financial institution will pay to your Administration the above cited amount, together with legal interests to be accrued thereon from the date of demand to the date of actual payment, in cash and in full, without delay and immediately upon your first written demand, without any protest or court judgment or consent of the said contractor and irrespective of any dispute that may arise between the contractor and your Administration and irrespective of the outcomes and legal results thereof.

This Letter of Guarantee becomes effective upon payment of the advance sum and will be valid until .../.../......8 and will become null and void if no written payment demand is received by our bank/special financial institution from you on or before the said date.

If and when this Letter of Guarantee is paid, the Letter of Guarantee amount will be paid to you as ....................9.

(Name of the bank or special financial institution)

......... Branch

(Name of the branch of the issuing bank or special financial institution)

Name, position and signature of the authorized officers of

(Name of the bank or special financial institution)

 

P.S. a) In the letters of guarantee to be issued against a counter-guarantee of foreign banks or similar other foreign crediting institutions, both the name of the foreign bank or crediting institution issuing the counter-guarantee will be given, and it will be stated that the letter of guarantee is based on a counter-guarantee. If the bid/payment currency is Turkish Lira, the letters of guarantee to be issued against a counter-guarantee will also be issued in Turkish Lira.

b) If the article "Currency of Bids and Payments" of the Administrative Specifications allows bidding in foreign currency or foreign currencies, the bidders will issue their letters of guarantee in the bid currency.

Footnotes

1. The relevant currency will be inserted herein in the letters of guarantee in foreign currency.

2. This period will be determined by the bidder, but can in no case be less than 30 days after the end of the validity term of the bid letter pursuant to article 35 of the 4734 Act.

3. The general rule is the payment of the letter of guarantee amount by the issuing bank in the base currency of the letter of guarantee. However, where a letter of guarantee in foreign currency is accepted by the Administration, but nevertheless the letter of guarantee amount can be paid only in Turkish Lira pursuant to the fiscal laws and regulations of the Administration, in this case, it will be clearly stated that the payment will be made over the foreign exchange selling rate of the Central Bank valid and current as of the date of payment.

4. The relevant currency will be inserted herein in the letters of guarantee in foreign currency.

5. This period cannot be less than the period to be determined by the Administration by taking into consideration the date of approval of the final acceptance memorandum in the Bid Tenders for Construction Works pursuant to article 13 of the Act 4735, and in the case of contracts other than the construction works, if a warranty period is specified for the purchased goods or the performed works, the end of the warranty period, and if no warranty period is specified, the work completion date, pursuant to article 35 of the Act 4734.

6. The general rule is the payment of the letter of guarantee amount by the issuing bank in the base currency of the letter of guarantee. However, where a letter of guarantee in foreign currency is accepted by the Administration, but nevertheless the letter of guarantee amount can be paid only in Turkish Lira pursuant to the fiscal laws and regulations of the Administration, in this case, it will be clearly stated that the payment will be made over the foreign exchange selling rate of the Central Bank valid and current as of the date of payment.

7. The relevant currency will be inserted herein in the letters of guarantee in foreign currency.

8. This period must be determined by the Administration by taking into consideration the periods of deduction.

9. The general rule is the payment of the letter of guarantee amount by the issuing bank in the base currency of the letter of guarantee. However, where a letter of guarantee in foreign currency is accepted by the Administration, but nevertheless the letter of guarantee amount can be paid only in Turkish Lira pursuant to the fiscal laws and regulations of the Administration, in this case, it will be clearly stated that the payment will be made over the foreign exchange selling rate of the Central Bank valid and current as of the date of payment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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