The Stance of Supreme Court On Bank Guarantees
By Team Legistify / 2016-06-09
A bank guarantee is a written contract given by a bank on behalf of its customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in the case, if it is not paid by the customer in the performance of its contractual obligations.

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The legitimacy of invocation of bank guarantees has always been a bone of contention between the parties who have entered into commercial arrangements. While the general view of the courts in India has been that invocation of bank guarantee should generally be not interfered by the courts when challenged, as it will defeat the purpose of such guarantees in commercial contracts. However, there is no dearth of judicial pronouncements against the invocation of bank guarantees albeit in exceptional circumstances.

A bank guarantee is a written contract given by a bank on behalf of its customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in the case, if it is not paid by the customer in the performance of its contractual obligations.

Types of Bank Guarantees

Unconditional bank guarantee

In an unconditional bank guarantee, the bank/guarantor has to pay the guaranteed amount to the beneficiary in whose favour the bank guarantee has been issued on demand, irrespective of any pending disputes;

A bank guarantee is a written contract given by a bank on behalf of its customer. By issuing this guarantee, a bank takes responsibility for payment of a sum of money in the case, if it is not paid by the customer in the performance of its contractual obligations.

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