Bank Guarantees

Bank Guarantees

A bank guarantee from a Bidvest Bank ensures that, should the debtor fail to settle a debt, the issuing bank will cover that debt.

Types of Guarantees

Tender Bond

The purpose of a tender bond, also known as a bid bond, is to safeguard buyers against unqualified tenders submitting a bid. The bond acts as security against the risk of the bidder failing to accept or execute the terms of the contract awarded to them.

Claim requirements:

  • A declaration in writing by the beneficiary stating that the bidder did not sign the relevant agreement within the defined period after being awarded the contract, and/or did not provide the required performance bond.

Performance Bond

The purpose of a performance bond is to safeguard a buyer against non-performance, insolvency, or any other goods or services not provided by a service provider as agreed to in the terms of the contract.

Claim requirements:

  • A declaration in writing by the beneficiary stating that the seller did not fulfill his or her contractual obligations properly or on time.

Payment Guarantee

The purpose of the payment guarantee is to ensure the seller that the payment obligations of a buyer are met. It can be issued as an alternative to a letter of credit, but does not offer the buyer the same level of security as a documentary credit.

Claim requirements:

  • A declaration in writing by the beneficiary stating their fulfillment of contractual obligations, and not having received payment to date.

Advance Payment Guarantee

The purpose of an advance payment guarantee is for a buyer to obtain a guarantee of security against an advance payment to a seller. It acts as collateral for reimbursement in the event the seller does not supply the ordered goods as agreed to in the terms of the contract.

Claim requirements:

  • A declaration in writing by the beneficiary stating that the seller did not fulfill his or her contractual obligations properly.

Warranty Bond

The purpose of a warranty bond is to ensure the buyer that work done by a seller is satisfactory, and serves as collateral to ensure that goods are delivered as agreed to in the terms of the contract.

Claim requirements:

  • A declaration in writing by the beneficiary stating that the seller did not fulfill his or her warranty obligations as contractually agreed.

Retention Money Guarantee

The purpose of a retention money guarantee is to ensure that the buyer receives a specified sum of money if the seller, having received retained money, fails to meet the obligations within the contract during the term of the guarantee.

Letter of Indemnity

Also known as an indemnity bond, the purpose of the letter of indemnity is to reduce risk in a contract by ensuring that there is a process in place for recovering compensation in the event of a breach. It is an undertaking by a third party such as a bank, to cover one party against specific loss or damage due to the action or failure of another party to fulfil its part of the contract.

Letters of indemnity are often used when transporting goods by ship where the letter protects the shipping company against any claims that may arise from the issue of a clean bill of lading.

Claim requirements:

  • In shipping: A declaration in writing by the beneficiary stating that the amount required by the guarantee serves to cover costs and/or claims for damages arisen as a result of the delivery of goods without presenting the original bills of lading.