Contents Of Domestic Bank Letters Of Guarantee

It is essential to distinguish between letters of guarantee to be issued to public institutions and organizations, letters of guarantee to be issued to official agencies, and letters of guarantee to be issued for private law relationships. Public institutions and organizations are required to use the templates specified in the relevant legislation for guarantee letters issued to official authorities, or the templates requested by the relevant institution or authority.[1]

For guarantee letters issued within the scope of private law relationships, there is no legal requirement regarding templates; however, bank practices and the underlying relationship will serve as limits in this regard.

In banking practice, the following matters are generally specified in the text of guarantee letters.

  • Type of letter (provisional, advance, definitive guarantee letter)
  • If the beneficiary is an individual, their full name; if a legal entity or institution, their full legal name; if there are multiple beneficiaries, their full names or legal names,
  • If the beneficiary whose acts, actions, or transactions are guaranteed is an individual, their full name; if a legal entity or institution, their full legal name,
  • The underlying relationship or relationships for which the guarantee is provided under the guarantee letter,
  • The condition that the obligations must not be fulfilled for compensation,
  • Payment in full and in cash upon the first written request,
  • The fact that any delay in payment will be paid with legal interest for the period of delay,
  • The validity period (dated or undated),
  • Stamp and authorized signatures of the branch of the bank issuing the letter of guarantee.

The type of letter may vary depending on the existence of matters in the underlying relationship, as detailed in the types of guarantee letters, if the matter relates to an advance payment and its refund, it shall be issued as an advance payment guarantee letter; if the matter arises from a tender relationship, it shall be issued as a provisional guarantee letter; and if the matter arises from a contractual relationship, it shall be issued as a final guarantee letter.

It is important for the name and surname or title of the addressee to be written in full and without omission, as this is important in the event of a dispute. In case of omission, the identity of the addressee may not be determined and the bank may encounter problems in the event of a claim for compensation. In this context, it would be more appropriate for us to indicate the addressee in a manner that leaves no room for dispute and is distinctive. If there are multiple addressees, to prevent potential disputes, the letter should include the following provisions: each addressee may make a claim for compensation, payment to one addressee will extinguish the debt in full, and the release of one addressee will bind the others. If these provisions are not included, it would be more appropriate for the compensation claim, release, and all other matters to be made by all the aforementioned addressees.[2]

In addition to the above, the guaranteeing bank may specify the presentation of a specific document or other conditions. In this case, the addressee must take these matters into account when making a claim for compensation.

Year: 2025

Application: Contents Of Domestic Bank Letters Of Guarantee

Lawyers: Mehmet Said Sarıbaş & Bilal Akbaba

E-mail: info@saribasakbaba.av.tr

Website: saribasakbaba.av.tr

 

[1] Guarantee letters to be issued in accordance with the State Procurement Law, the Public Procurement Law, Customs Law No. 4458, and the Customs Regulation are examples of this. Guarantee letters required to be submitted to courts and enforcement offices are also in a specific format, and letters outside this format are not accepted in practice.

[2] Seza Reisoğlu, Guarantee Letters and Counter-Guarantees, p. 92.