Bank Guarantee

Dated:    ……………

Mr. X

AVP & Sub- Manager

Bank Asia Limited

Gulshan Branch

94, Gulshan Avenue


Dhaka 1212

Re:      Vetting of Bank Guarantee to be issued in favour of  Esatern Bank Limited, A/C: Z Sweater Limited

Dear Sir,

We refer to your fax dated 15.07.2004 regarding the captioned subject.

We have perused the captioned draft Guarantee and our observations are as follows:

Sl. Clause


01 Clause 1 It appears from the preamble that the Bank Asia Limited (hereinafter referred to as the “Bank”) is issuing the present Guarantee in acknowledgement of taking over and as security of the Acceptance liability of Z Sweater Ltd with the Eastern Bank Ltd.In the premises, the Bank’s liability under the Guarantee should be confined to the outstanding amount against the Acceptance liability. Further, if the liability under Acceptance is taken over, no question of accrual of additional liability will arise.

We therefore are of the view that the Guarantee should be provided only for the outstanding  liability against Accepted bills and thus not for any unspecified amount.

02 Clause 2 As we understand, this guarantee is provided  as security against the FBP/IBP facility and in the event of  non-collection of the bills, Eastern Bank shall invoke this Guarantee.It is stated in this clause, that  the Bank also guarantee to pay all future Accepted bills liabilities.

It is pertinent to mention here that as per the preamble, the Bank shall adjust only the existing liability of the Z Sweater Ltd.(“Applicant”). As such, it is advised to delete the entire phrase from the fifth line starting with “We also guarantee you to pay all future accepted bills liabilities under import back to back L/C as and when lodged, accepted and become due for payment against outstanding letter of credit liabilities as per list attached if the proceeds are not realized against the corresponding export under Foreign Documentary Bills for Collection to settle the accepted bills liabilities”.

03 Clause 3 The same comments as above.

As such it is hereby advised to delete the phrase “and onward Acceptance Liabilities” from the second line.

04 Clause 04 As we understand, under the arrangement the Bank is taking over all the existing liability of the Applicant due with Eastern Bank Ltd and this Guarantee is provided only for the Acceptance liability. As such under this Guarantee the Bank is not under any obligation to settle any claim of commission and other charges against outstanding L/Cs.It is therefore advised to delete the entire clause.
05 Clause 06 It is advised to replace “may”      with  “shall”
06 Clause 7 The present clause  binds the Bank to pay the Guarantee amount on the very date on which the invocation is made, otherwise  interest will attract.  It is thereby advised to re-phrase the entire clause as follows:“The Bank shall within 3 (three) days of receiving the demand make payment of the demanded amount without raising any objection or  without referring the demand to the Bank. In case of delay in making payment, the Bank shall pay delinquent charges at the rate of 16% per anum for a period from the date the payment has been requested by you until the date of actual payment”.
07 Additional Clauses It is advised to incorporate the following clauses numbering in order:

  1. “That  the Guarantee shall remain valid for a period of ______________ months  up to ___date_____. The guarantee is extendible at the request of EBL in writing.
  1. The claim under this guarantee can be made for the full amount or any part thereof”.

Apart from the above observations, the  draft Guarantee is found in order.

Thanking you.

Yours faithfully,

For: The Lawyers & Jurists

M.L.Hotel Tower Ltd,

208,Shahid Syed Nazrul Islam Sarani,

Bijoy Nagar, Dhaka-1000.