Guarantee Bid Bond | Distinguish Between Commercial Guarantee And Bond

FAQ: GuaranteesFAQ: Guarantees

Frequently Asked Questions
What is the difference between a guarantee payable on demand and a conditional guarantee?

Under a guarantee payable on demand, the bank will typically pay against a declaration of breach of contract or default, whereas under a conditional guarantee, the bank will wait for confirmation that the condition has been satisfied before paying.

What is a bid bond and what is a performance bond - and why must they be issued?

Bid or tender bonds are issued by the bank on behalf of an exporter to protect the importer in cases where the exporter's bid is accepted under a tender process but the exporter fails to sign the contract.

A performance bond is also issued by the exporter's bank and will reimburse the importer if the exporter fails to fulfil its obligations under the contract.

What is the difference between a direct guarantee and a counter guarantee?

The direct guarantee is issued by the bank and sent direct to the beneficiary or sent via his bank. In contrast, if the bank asks a foreign bank to issue a guarantee on our behalf, the bank issues a counter guarantee as security.

If the bank issues a counter guarantee, it means as a rule that there are more expenses entailed in the issue of the guarantee than in an issue of a direct guarantee, as we are actually dealing with two guarantees. Furthermore, the guarantee will not be subject to the laws of your country, which for example can mean that an expiry date might not be respected.

What is the difference between guarantees with and without an expiry date?

If a guarantee is issued with an expiry date, it means that the guarantee is no longer valid after this date, provided the guarantee is subject to the laws of your country. If subject to foreign law, the beneficiary's country may fail to recognise this and hold the guarantee valid for claims after the expiry date.

If there is no expiry date in the guarantee, the guarantee can be cancelled only when either the original guarantee is returned to the bank or when we receive notice that we are released from our obligations.

Can the bank confirm a guarantee issued by a foreign bank?

Yes, as long as the issuing bank requests that we do so and that we are able to approve the bank as well as the content of the guarantee.

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Trade & Export Finance products and services

Read More about our trade & export finance products and services in these booklets (PDF):

Download factsheet on Documentary Credits
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Danske Bank A/S, London Branch, 75 King William Street, London EC4N 7DT, United Kingdom. Telephone: +44 (0)20 7410 8000 Facsimile: +44 (0)20 7410 8001 E-mail: [email protected] VAT number: 853 7590 92. Danske Bank A/S, London Branch is authorised by the Danish Financial Supervisory Authority (Finanstilsynet) and is subject to limited regulation by the the Financial Conduct Authority and the Prudential Regulation Authority. Details on the extent of our regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from us on request. Registered Branch in England and Wales, Company No. FC011846, Branch No. BR000080. Danske Bank A/S, Incorporated in Denmark, CVR No. 61 12 62 28 Copenhagen. Our details can also be viewed on The Financial Services Register under Firm Reference Number 124655.

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