The
bank guarantee is a kind of commitment established by a specific bank for
paying off to a specific party who holds as guarantor. Bank guarantee is a commercial contract whereby one party gives
guarantee to pay whole amount of that said commercial contract by another party
is called agent. When buyer defaults to pay the contract amount then
seller complains to the guarantee holder to compensate the contract value
within a stipulated time.
All kinds of
international and foreign currency based transactions are conducted according
to the terms and conditions negotiated between buyer and seller. Bank guarantee
ensures payment facility and also reduces potential risk that may occur
from such kinds of international transactions. Bank guarantee provides flexibility
to the seller who is dealing with export business and they need suck payment
guarantee in order to continue their export business. There may be
different rules for different countries depending upon
their standards of business rules and regulations.
Without appearance of bank guarantee, there will have various kinds of
shortcomings in order to continue international business transactions.
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