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BANK GUARANTEE ? DEFINITION OF BANK GUARANTEE


What does the term 'bank guarantee' mean? Definition of Bank Guarantee?


Bank Guarantee is a Commercial instrument in the form of guarantee from a bank/lending institution on behalf of a customer ensuring that if the customer will fail to deliver the contract  the bank will be responsible to liabilities of the debtor.

 

How do bank guarantees help in commercial contracts? Business benefits of Bank Guarantee?

Bank guarantee is an important instrument involved in international trade, projects and contracts assures a security to the beneficiary.

It is an assurance from the Leading financial institutions/banks, to guarantee of payment without tying up the customers capital, so the customer can utilise the money for other business activities and the beneficiary is getting cent percent guarantee also.

The beneficiary can encash the guarantee and avail the amount of guarantee immediately without any litigation.

The legal and granting injunction against bank guarantee is also restrained. So the bank guarantee achieves relevance.


TYPES OF BANK GUARANTEE
Kuwait Visa Procedures

Payment Guarantee -

Payment guarantee is issued by the buyers bank to the supplier (beneficiary) to assure that payment will be done once goods will be shipped . It is used along with the letter of credit.

Performance Guarantee -

Performance guarantee is a irrevocable bank guarantee issued by the seller's bank guaranteeing to the buyer if the shipment/goods are not according to the agreement, in this case seller must pay to the buyer a penalty  around 10% of the total contract value.

Advance Payment Guarantee-
is provided by the seller’s bank. This type of guarantee is used when the buyer has to transfer pre-payment to the seller. By demanding the guarantee the buyer ensures that the pre-payment will be returned to him if the seller fails to supply the goods according to the contract. The guarantee is issued by the seller’s bank that irrevocably commits itself to return the money to the buyer if the seller defaults.

 

 


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Bank guarantee ? Definition of Bank Guarantee? Benefits of Bank Gurarantee ? the relevence of Bank Guarantee? Different types of Bank Guarantee? Bank Gurarantees from the Banks of Kuwait



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