Demand Guarantee

A demand guarantee is a financial instrument requiring immediate payment upon request, without needing proof of a default by the guaranteed party.

Banks, commercial transactions, and international trade often utilize demand guarantees. Examples include performance bonds, bid bonds, and advance payment guarantees.

Parties to a demand guarantee include the guarantor, the beneficiary, and the principal. The guarantor issues the guarantee and pays upon demand. The beneficiary receives the payment. The principal is the party whose obligation is secured.

Different types of demand guarantees are used for specific purposes. Performance bonds ensure contract fulfilment. Bid bonds guarantee adherence to bid conditions. Advance payment guarantees secure repayment of advance funds.