Bank Guarantee If...

Bank Guarantee If, for example, a person contracts to carry out some work for a government or non-government organization and agrees to pay a stipulated amount as damages in the event of his not completing the work according to the conditions agreed upon by both the parties and a bank stands surety for the payment of the damages it is called 'bank guarantee'.

(i) Such a guarantee is in order when the bank expresses its willingness in this behalf by word or action and the owner accepts it along with all the agreed conditions. It makes no difference that the bank may undertake that the person for whom it has stood surety will repay his loan or will fulfill the conditions which have been agreed upon.

(ii) It is obligatory upon the person who undertakes to perform the task that if he does not complete it, he would act according to the agreed condition, provided that he has accepted this condition which is binding…