ARTICLE ON BANK GUARANTEE.

                                                         Bank Guarantee:

Bank Guarantee means a comfort, which is being given by issuing bank or financial service provider, to a party(Beneficiary in whose favour the guarantee is issued) of losses or damages if the Client (on whose behalf the guarantee is being issued) fails to complete or conform to the terms of agreement.

By issuing the guarantee, the issuing bank or financial service provider is assuring payment of the certain amount of money (as specified in the bank guarantee) to the beneficiary in case of non-performance of a certain contract according to the terms and conditions contained in the same. 

By furnishing the Bank Guarantee, the buyer binds itself with the seller that it has an implied commitment to fulfill the terms and conditions of the agreed contract. If it fails to comply with the same, the bank will honor it. 

The party to whom the BG is given cannot go to its bank and en-cash. It is just a comfort that if we do business with some unknown party, we might not be on loss as we are not aware honesty, sincerity and authenticity of that party.

The guarantees are not issued just in trades; it also given to government authorities forbidding of land, some project say hydro power or mines etc. For example when a company bid for a mines (ore or coal), it need to furnish the guarantee to the local authorities in which state it is going to bid. Also suppose someone needs bid for road project, it is requires to furnish the guarantee to the government authorities or the main contractor in case the company wish to work as sun-contractor.Bank Guarantees are issued for some purpose and for a tenure which automatically get revoked on fulfillment of such purpose and/or completion of such specified period or vice versa.

 For example a bank guarantee might be revoked by the seller(beneficiary) when the buyer fails to pay the seller for the goods supplied. In such a situation, the bank or financial service provider pays the beneficiary to the extent of the amount of Bank Guarantee.Similarly, on the other side if the Seller fails to deliver the goods or complete the terms of agreement, the bank guarantee may be cancelled by the buyer.

Jason Gavin

Telephone/WhatsApp: + 44 7452 390049

Twitter: @JasonGa58390383

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