CHAPTER 30 - PARTIES IN GUARANTEES

•     Principal: Principal (Applicant) means the party indicated in the guarantee as having its obligation under the underlying relationship supported by the guarantee. The applicant may or may not be the instructing party.

•     Guarantor Bank: Guarantor is the institution that issues the bank guarantee. As per URDG 758 guarantor means the party issuing a guarantee, and includes a party acting for its own account.

•     Advising Bank: Advising party means the party that advises the guarantee at the request of the guarantor. Also known as Receiving Bank.

•     Beneficiary: Beneficiary means the party in whose favour a guarantee is issued.

CHAPTER 29 - GENERAL - BANK GUARANTEES

URDG758 governs the operation of Bank Guarantees

It is an undertaking/promise/indemnity given by a Bank on behalf of the Applicant and in favour of the Beneficiary. Whereas, the Bank has agreed and undertakes that, if the Applicant failed to fulfill his obligations either Financial or Performance as per the Agreement made between the Applicant and the Beneficiary, then the Guarantor Bank on behalf of the Applicant will make payment of the guarantee amount to the Beneficiary upon receipt of a demand or claim from the Beneficiary.

Bank Guarantees earlier governed by URCG (Uniform Rules for Contract Guarantee), now it has been replaced by URDG (Uniform Rules for Demand Guarantees).

In Bank Guarantees not all the Types of Guarantees where Buyer or Importer needs to be Applicant and Seller or Exporter need to be Beneficiary. Only in few types that concept will work.

Bank Guarantees can also be called as Demand Guarantees and Guarantees.