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Bid bond (tender bond)

Area of application
Primarily in export business,
with project tenders. • Standard
terms
Purpose
To secure any claims by the • Forms
party inviting the tender on the • Sample
tenderer in the event of texts
withdrawal of the bid before its • Your
expiry date or if the bid is relationshi
modified unilaterally – or if the p with us
tenderer, upon being awarded
the contract, refuses to sign
the contract or provide further
guarantees on request.

Guarantee amount
In general 2% to 5% of the
• Glossary
TEF
value of the contract.
• FAQ
Term • Special
Usually short term. guarantee
requireme
Special features nts abroad
Quite often the party inviting • Foreign
tenders cannot complete the business
evaluation of the bids risk
submitted within the specified • Virtual
time. In general the tenderers crash
are then asked to extend the course
duration of their guarantees.
The following associated risks • UBS
should not be underestimated: seminars

• changes in the
market
• changes in the price
structure
• Do you
• inflation have any
• etc. questions
on products
Bid bonds (tender or
bonds) often lead to processes?
other obligations, e.g. • Order a
advance payment brochure
guarantees and
performance bonds.

In international
business, "pay or
extend" claims are
quite often made
under guarantees.
This simply extends
the validity of the
guarantee.
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Advance payment
guarantee

Area of application
In import-export business, but
also in domestic commercial
business, trade and industry.

Purpose
To secure any claims by the
buyer on the seller for
reimbursement of the buyer's
advance payment on the
contract price before delivery
of the goods (or advance
payment of the full contract
price) – in the event that the
seller has failed to meet his or
her contractual delivery
obligations in full.

Guarantee amount
The amount of the instalment
or advance payment.

Term
Up to delivery of the goods
plus e.g. 15 days.

Special features
If a documentary credit was
opened in connection with the
underlying transaction and
advised by UBS, the following
clause may be included in the
guarantee if the shipping
documents are submitted to
UBS:

«Our guarantee will be


automatically reduced by ……
per cent of the invoice value
with each part-shipment made
by … (supplier). Evidence of
delivery is deemed to have
been provided once …
(supplier) has submitted the
proper documents to the bank
… under documentary credit
no. ….»

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Performance bond

Area of application
In import-export business, but
also in domestic commercial
business, trade and industry.

Purpose
To secure any claims by the
buyer on the seller arising
from default in delivery or
performance of the terms of
the contract (e.g. construction,
assembly, execution).

Guarantee amount
Frequently 5% to 20% of the
value of the contract.

Term
Until the contract has been
fulfilled.

Special features
In international business, "pay
or extend" claims are quite
often made under guarantees.
This simply extends the
validity of the guarantee.

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Guarantee for warranty
obligations

Area of application
In import-export business, but
also in domestic commercial
business, trade and industry,
where it is more often a
surety.

Purpose
To secure any claims by the
buyer on the seller due to
possible defects appearing
after delivery.

Guarantee amount
Frequently 5% to 20% of the
value of the contract.

Term
Depends on business sector.
Frequently: 1 year after
delivery or commissioning.

Special features
In the construction trade, the
guarantee for warranty
obligation in the form of a
simple guarantee or a joint
and several guarantee is
known as a building (or works)
contractor's guarantee. It can
also be used in the export
business as a "retention bond"
(substitute for payment
retention, often 5% to 10% of
the value of the contract). In
international business, "pay or
extend"
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Payment guarantee

Area of application
In import-export business, the
payment guarantee is often
used instead of a
documentary credit – upon
delivery against «open
account».

Purpose
To secure any claims by the
seller on the buyer for
payment of the contract price
by the agreed date.

Guarantee amount
Contract price or part thereof.

Term
Payment date plus e.g. 15
days.

Special features
In import-export business,
mainly abstract guarantees
payable upon first demand.

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Guarantee securing a credit
line

Area of application
Worldwide.

Purpose
To secure any claims by the
lender on the borrower due to
a credit (loan, etc.) not being
repaid in accordance with the
terms of the contract.

Guarantee amount
Amount of the credit. Usually
includes a margin to cover
accrued interest and incidental
expenses.

Term
Expiry of loan plus e.g. 15
days.

Special features
Mainly abstract guarantees in
favour of the foreign or
domestic lending bank. In
international business, «pay or
extend» claims are quite often
made under guarantees. This
simply extends the validity of
the guarantee.

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Letter of indemnity for
missing bill of
lading

Area of application
Specifically for importers when
the bill of lading is missing.

Purpose
To secure any claims by the
shipping line/shipping
company on:

• the buyer resulting


from the goods
arriving from
overseas being
released without the
original bill of lading
being presented (e.g.
due to postal delays
or even loss).
• the supplier due to
issuance of a
replacement bill of
lading (original
misplaced or lost).
Guarantee amount
1 to 2 years; in practice,
however, often unlimited or
until the original bill of lading
or release document from the
beneficiary is presented.

Term
1 to 2 years; in practice,
however, often unlimited or
until the original bill of lading
or release document from the
beneficiary is presented.

Special features
In practice, the wording of the
guarantee is frequently
stipulated by the shipowner
and must be sent directly by
the debtor, with a counter-
guarantee from the bank, to
the shipping line.

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