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Bank Guarantees
Bank guarantee is one of the facilities that banks extend to their customers. a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default . there are three person in a contract of guarantee
1. the person giving the guarantee is called the guarantor or surety
2. the person on whose behalf the guarantee is given is called the principal debtor
3. and the person in favour of whom the guarantee is given is called the creditor or beneficiary

Guarantee is three types

1. Performance Guarantee : these are guarantee issued in respect of performance of a contract or obligation.
e.g guarantee in lieu of tender money/ earnest money deposit (EMD) , guarantee in lieu of security deposit and shipping guarantee.

2. Financial Guarantee : bank guarantee for supply of goods on credit basis, guarantee in favour of customs authorities, bank guarantee in favour of tax authorities are example of financial guarantee.

3. Deferred Pament Guarantee : these guarantee normally arise in the case of purchase of machinery or such other capital equipment by customers ( from suppliers in india or outside ).

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