DIRECT GUARANTEES TYPES OF GUARANTEES
To secure claims on the tenderer by the party
obligor Beneficiary inviting tenders in case of early withdrawal or
DEFINITION obligor Beneficiary
modification of the bid; or in a case where a tender
A bank guarantee is an unilateral contract between is accepted, but the tenderer refuses to sign the
a bank as guarantor and a beneficiary as warrantee, Guarantee
contract or to provide further guarantees on request.
in which the bank undertakes to make payment to Bank
the beneficiary within the limits of a stated sum of ADVANCE PAYMENT GUARANTEE
A DIRECT GUARANTEE occurs when the client To secure any claims by the buyer on the seller for
money if a third party fails to perform an obligation A DIRECT GUARANTEE a guarantee directly to
authorises the bank to issueoccurs when the client
or another event materializes or fails to materialize. authorises the
the beneficiary. bank to issue a guarantee directly to reimbursement of the buyer’s advance payment on
the beneficiary. the contract price to the seller, in cases where the
goods are not delivered or only delivered in part.
FEATURES & BENEFITS
Guarantees are instruments designed to secure To secure any claims by the buyer on the seller
performance and are therefore an assurance arising from default in the delivery or default or
that contractual obligations will be fulfilled. INDIRECT GUARANTEES performance of the terms of the contract.
In a contract of guarantee, the guarantor
obligates himself toward the obligee of the PAYMENT GUARANTEE
principal obligor to answer for the performance Principal Underlying transaction To secure any claims by the seller on the buyer for
of the latter’s obligation.
obligor Beneficiary payment of the contract price by the date agreed
GUARANTEE FOR SECURITY FOR A
bank CREDIT LINE
Bank bank To secure any claims by the lender on the borrower
due to a credit not being repaid in accordance with
In an INDIRECT-GUARANTEE, a second bank is involved. This
bankan INDIRECT-GUARANTEE, a second to issue involved. This
In will be requested by the initiating bank bank is a guarantee the terms of contract.
in bank will be requested by the initiating bank to issue a guarantee
the return for the latter’s counter-guarantee.
in the return for the latter’s counter-guarantee.
This document was created by Lukas Crafford