What is a bank guarantee? How is the current bank guarantee process implemented? Join LawFirm.Vn to find out through the following article.
1. What is a bank guarantee?
According to the provisions of Article 335 of the 2015 Civil Code, a guarantee is a commitment by a third person (guarantor) to the obligee (guarantee) to perform an obligation on behalf of the obligee (obligee). guarantee), if when the obligation is due, the guaranteed party fails to perform or performs the obligation incorrectly.
A bank guarantee is a form of credit granting, whereby a credit institution commits to the guarantee recipient that the credit institution will perform financial obligations on behalf of the customer when the customer fails to perform or perform. not fully committed obligations; The customer must accept the debt and repay the credit institution according to the agreement.
2. Characteristics of Bank Guarantee
– Subject is a credit institution performing bank guarantee activities;
– Bank guarantee transactions have the purpose and consequence of creating two contracts, including a guarantee service contract and a guarantee contract/guarantee commitment. These two contracts are independent in terms of subject matter as well as the legal obligations of the parties in the contract;
– Bank guarantee transaction is a double transaction;
– Bank guarantees are established and implemented based on documents.
3. Bank guarantee process
The party constructing, bidding, paying, etc. (hereinafter referred to as the guaranteed party) must have a bank guarantee before signing a contract with the partner (hereinafter referred to as the guarantee recipient).
3.1. Documents requesting guarantee
- Guarantee application form
- Legal records
- Purpose profile
- Business financial records
- Collateral records
3.2. Review guarantee documents
After receiving complete documents, credit institutions (mainly banks) conduct appraisal of contents such as: Legality and feasibility of the guarantee project; capacity of the guaranteed party, form of guarantee; financial situation of the guaranteed party.
In case the credit institutions approve, sign a guarantee contract with the guaranteed party and issue a deed of guarantee.
3.3. Notify the guarantee recipient
The bank notifies the letter of guarantee to the guarantee recipient. The letter of guarantee clearly stipulates the basic contents of the guarantee contract, the payment method of the credit institution to the guarantee recipient, for example: opening a letter of credit, signing a promissory note, etc.
3.4. In case the guarantee obligation occurs
The credit institution performs the guarantee obligation with the guarantee recipient if the obligation occurs.
In case the guaranteed party violates the guaranteed obligations, the credit institution will make payments on behalf of the insured party and automatically record the required debt for the repayment amount according to the overdue debt interest rate of the guaranteed party. receive. Credit institutions apply necessary measures to recover debts such as selling collateral, filing lawsuits, etc.
