Bankgarantie

A bank guarantee is an independent security instrument under which a bank undertakes to pay a specified sum to the beneficiary if the principal debtor fails to perform its contractual obligations. The bank acts as a third party, and the guarantee is frequently payable “on first demand”, meaning that payment is made without the beneficiary being required to establish that a breach has in fact occurred.

The utility of a bank guarantee lies in its capacity to limit the beneficiary’s risk and to provide liquidity without the need for attachment or proceedings against the debtor. This instrument is widely used in construction, lease and sale agreements to secure performance and to strengthen the beneficiary’s negotiating position.

In practice, the applicant pays a commission to the bank for issuing the guarantee, which is administered strictly in accordance with its stated terms and validity period.