Demand Guarantee to Secure Payment Clause
(General Contract)

Summary

This clause is an example of a standard payment provision for inclusion in a general contract for the sale of goods or services that requires the buyer to secure its payment obligations using a demand guarantee. This clause includes practical guidance, drafting notes, and alternate and optional clauses. A demand guarantee is an irrevocable written undertaking issued by a guarantor (typically a bank or financial institution) pursuant to the instructions of an applicant to pay money up to a specified amount upon presentation of a demand complying with the terms and conditions set forth in the guarantee. While there are different types of demand guarantees, a payment guarantee is typically the type used to secured payment under a contract for the sale of goods or services. Demand guarantees are considered the legal equivalent of a standby letter of credit providing credit support under a contract, particularly when the buyer and seller are unfamiliar to each other. Guarantees may be ...