Bank guarantees serve to ensure payments or the fulfilment of other contractual obligations undertaken in international business. The beneficiary of the guarantee is indemnified against a particular risk.
We would be happy to provide you with sample texts for your contractual negotiations with partners abroad.
Upon the request of their customers (guarantee applicants) banks usually issue abstract guarantees, i.e. guarantees which are payable on first demand.
The bank guarantee is independent of the underlying relationship between guarantee applicant and beneficiary. Under such abstract guarantees payable on first demand, the bank issuing the guarantee must pay the beneficiary all amounts up to the maximum amount of the guarantee upon his first simple demand.
The bank must pay the amount(s) without checking whether the demand is justified.
In international business and trade, the bank guarantee has come to replace the once-customary cash deposit.
A direct guarantee is granted to the beneficiary directly by the bank of the party that is obliged to pay.
An indirect guarantee involves a second bank. This bank is requested by the instructing bank to issue a guarantee under a counter-guarantee by the latter.
The instructing bank must undertake to pay upon first demand of the issuing bank all amounts up to the maximum amount of the counter-guarantee which have been claimed by the beneficiary.
Indirect guarantees are used when the beneficiary is uncertain of the credit-worthiness of the banks in the contractor's country, the country risk in general or the prevailing law in the country of issuance.
The legal provisions in the beneficiary's country as well can require the indirect issuance of a guarantee.
We will assist you in preparing or examining guarantee texts as well as lodging claims under a guarantee.
Let our knowledge and experience in international business work for you.