Bank Guarantee : Important Tools Of Commercial Transaction

2440 Words Jan 21st, 2015 10 Pages
This Term Paper has been submitted by:

Avantika Sharma

ID No: 214087

On 21st January, 2015

Commercial Law Project

During the Winter Semester – 2014-15

Bank Guarantee: Important tools of Commercial Transaction
Chopperscam, the word used to address one of the biggest defence scam of the past decade. Some ministers and defence personnels were accused of accepting bribes from an Italian Company, Finmeccannica’s, in lieu of lobbying for the company to get them a 560 million-euro helicopter deal, from the Indian government. India scrapped off the contract after allegations of bribery emerged in Italy against executives at the Finmeccanica 's AgustaWestland unit. The loss due to this deal would have put India in a tight position, had it not been the concept of bank guarantee. Before Finmeccannica’s bid was accepted, they had to furnish a bank guarantee in the favour of Indian government, which today, enabled the Indian government to recover the loss sustained by them due to this deal.
A bank guarantee is a contractual undertaking by a bank, to pay a specific amount in case of any default on the part of the principal debtor. In simpler terms, a bank guarantee can be described as a personal security under which a bank promises to pay to the beneficiary, if the clients fail to perform their part of the obligation. The only required condition is that the beneficiary has to present the document with the demand for payment complying with the terms of bank guarantee. Even…
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