Why irrevocable bank guarantee

Currently irrevocable bank guarantee - is one of the most popular types of financial services.After all, at the conclusion of each deal there is a risk of failure of a party from its obligations, and these failures can result in significant financial losses.To protect themselves from the possible risks - need this service.But what is irrevocable bank guarantee?How is it used?

Bank guarantee is considered to be a commitment (made in writing) to pay a specified amount to the beneficiary, who has assumed the banking institution, which is the guarantor of the transaction, in case of failure of the principal's liabilities.The financial institution that issues the guarantee, is not liable to fulfill the terms of the contract between the parties, but, nevertheless, assumes responsibility to make all payments, which are set out under the guarantee issued.This is not a form of payment and is used only in the event of default to the beneficiary.

Quite often, as a guarantor of financial activity to perform its obligations is a banking institution.This form of commitment is very common between legal entities.Commitment concluded between the financial institution and creditor to pay the debt - this is the provision of an irrevocable bank guarantee.

This type of transaction is made officially, between the lender and the bank is a contract signed by the chief accountant of the financial institution and another seal.

There are certain circumstances in which the irrevocable bank guarantee expires.These include: the rejection of its creditor's rights when returning to the bank guarantee document;failure lender of services and release of data from the Bank of its obligations;the completion of the warranty period;the performance of these obligations by the debtor.

irrevocable bank guarantee - is the actual confirmation of the solvency of the financial institution artist, as well as the ability to ensure the implementation of the obligations specified in the contract.If the obligations are not fulfilled to the creditor, they assume the bank.This means that he pays for the required in writing to request some money to the lender.

irrevocable bank guarantee can not be revoked Organization guarantor.That is, the financial institution providing the fulfillment of the conditions of the transaction, is obliged to fulfill its obligations.This rule applies for the duration of the guarantee, which is very important for the customer.When compiled

agreement with the bank, you need to very clearly and competently prescribe its irrevocability, in order to reduce the risk of various disputes with the cooperation of the parties.The warranty period is almost always applies to the duration of the contract with the financial institution.

When a bank issues a guarantee, he shall be entitled to compensation for the provision of services by the debtor, as well as damages in the payment of the debts of the performer.With a deal for this type of guarantee is necessary to be taken into consideration even the smallest nuances.

Today, bank guarantees - this is one of the most common financing instruments, providing the reliability of contracts, as well as the turnover included in the scope of commercial lending.