Guarantee bonds play a significant role in contemporary economic life, functioning as the security required in most—if not all—major construction contracts, namely those where the government is the employer.

Kuwait was among the few countries in the Arab region to regulate letters of guarantee, often described as bank creations, initially originating from commercial practice rather than legislative regulation. However, courts in Kuwait approved the use of such instruments and—subsequently—the legislature intervened and acknowledged them for the benefit of commercial practice, and to relieve the complications and formalities that characterise similar instruments under Civil Law.

This article attempts to shed some light on the situation in Kuwait with regard to letters of guarantee, used largely as security instruments in Public Works Contracts. It should be noted that the aim of the article is not to study the legal regulation of letters of guarantee in their commercial context—in this regard, readers are referred to general works on the law of commerce—but rather to look at their connection with public works contracts in Kuwait, and their application in this respect.1

The Kuwaiti legislature has regulated construction contracts extensively.

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