Guarantees

Guarantees

A letter of guarantee is a written pledge issued by the bank at the request of its customer in order to guarantee the execution of a specific obligation within a specified period. The bank is commited to pay a third party (beneficiary) a certain amount of money at the first request received during the validity of the guarantee letter.
The letter of guarantee is an image of the bank guarantee created by the commercial custom to meet the needs of commercial transactions and has been used in recent years as an alternative to monetary insurance, which may be required to be presented in some commercial contracts, especially international ones.
The letter of guarantee has a great importance in practical life, it constitutes a guarantee rather than a cash insurance, a guarantee in the case of bids and tenders.