《国际商贸》英语Chapter 10 Bond.ppt

Chapter 10 Bond 10.1 Introduction 10.2 Types of Bonds and Procedure Introduction In international trade, both the contracting parties will seek ways to protect themselves from the risks. While dealing with international trade, all kinds of risks may occur. For example, in international bidding, the party inviting tender will suffer a loss if the tenderer refuses to take the bid upon awarded. Introduction Even under a documentary credit, the importer cannot be protected if the exporter fails to make shipment after the credit is established in his favor. These problems can be solved by bond, where the contracting parties will be protected in the sense that contractual obligations will be performed or the breached obligations will be compensated for under a bond. A bond is a written promise issued by a guarantor, usually a bank or an insurance company, at the request of its customer (the principal/applicant), undertaking to make payment to the beneficiary within the limits of a stated sum of money in the event of non-performance of the contractual obligations by the principal. It is also called a letter of guarantee (L/G). A bond is a guarantee to the beneficiary that the principal will fulfill his contractual obligations. Definition and Roles of Bonds Parties to a Bond Principal/Applicant The principal is the person at whose request the guarantee is issued. In the event that he fails to fulfill his contractual obligation, the principal will be claimed after the payment being effected by the guarantor. The Beneficiary The beneficiary is the person in whose favor the guarantee is issued. In the event of default by the principal, he is entitled to obtain payment upon presentment of correct documents against the bond with the guarantor. The Guarantor The guarantor is the issuing bank of a bank guarantee. It is a bank located in the applicants country. It is responsible to issue a bond in agreement with the application form. Types of Bonds and P