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This kind of letter of guarantee is introduced by companies want to introduce their offers in tenders instead of paying the preliminary deposit in cash.
letter of guarantee Elementary PROVISIONAL LETTER OF GUARANTEE (BID BOND) And is provided by the client with the tender submitted by him in the tender or bid, and represents a certain percentage of its value in order to reassure the Tarahh tender or bid to the seriousness of bids received and the irreversibility of the bidder if the prices have changed, or show him the error appreciation And ensuring called Primary or temporary because the purpose of it ends up not adjudication or bid on the client bidder or Brsoeha him and his signature on the contract. Fu recovered in both cases the client letter of guarantee, but if the decline to sign the contract after it was racy for the Beneficiary Tarahh tender or bid to confiscate the value of the collateral the primary.
'Letter Of Guarantee' :
1. A type of contract issued by a bank on behalf of a customer who has entered a contract to purchase goods from a supplier and promises to meet any financial obligations to the supplier in the event of default.
2. A document issued by a bank on behalf of a call writer guaranteeing that the writer owns the underlying asset and that the bank will deliver the underlying securities should the call be exercised.
A letter of guarantee often helps firms conduct business with parties they would never normally get the chance to deal with. Many suppliers will often choose to do business with customers that have a letter of guarantee because it eliminates the risk that they will not receive the appropriate payment for the goods that they are selling. Additionally, call writers will often use a letter of guarantee when the underlying asset of a call option is not held in their brokerage account.
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