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THE GUARANTEE Powered By Docstoc
					                                                         DIRECT GUARANTEES                                                         TYPES OF GUARANTEES
                                                                                                                                   BID BOND
                                                                               Underlying transaction
                                                                                 Underlying transaction
                                                                                                                                   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.
                                                                  Bank             Guarantee
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.
                                                                                                                                   PERFORMANCE BOND
    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
                                                                                  Underlying transaction
    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                                         Guaranteeing
                                                                                                             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