The Surety like the bank bonds is a very widespread procedure within our economic system has some important features and unknown as well.
The endorsement is a joint commitment to fulfill obligations, either monetary or otherwise in favor of a third party. Legal and practical purposes, the monetary backing by a third party provides assurance voluntary consent of the creditor’s debt to the debtor if the debtor does not cover the payments agreed.
The Surety, is that by which the insurer undertakes to indemnify the insured for the losses suffered in the event that the policyholder fails to fulfill the obligations, legal or contractual, to keep with it.
Under Spain legislation bank´s bonds and a surety bond is the same. (Royal Decree Law 2/2000 of 16 June, approving the revised text of the Law 13/1995 of May 18, the Public Administration Contracts)
SURETY INSURANCE BENEFITS VS BANK BONDS
Hiring a surety bond instead of a bank bond have many benefits, the surety has no issue or cancellation fees of each transaction, no other charges like the intervention of a notary public, without counter, but what stands out is that it does not consume the CIRBE bank risk, so the financial lines that may be available to any company be free to finance other projects.
As an insurance premium would be tax deductible treatment. The surety is not bound to appear in economic statements, the bank guarantee itself.
THE MOST COMMON BOND INSURANCE
The provisional amount of the security is fixed by the contracting authority and may not exceed 3% of the estimated contract budget.
It may require the provision of this warranty, upon presentation of the proposals to all tenderers to meet the maintenance of their bids to the awarding of the contract.
Once established, the document certifying that the security should be sent to the contracting authority with the proposal, logically prior to the date of expiry of the deadline for submissions.
They are formal procedures aimed at acquiring an asset, build a work or receive a service through which implementing agencies (usually governments or other government) asking publicly received and evaluated by objective and acquaintances deals, awarding the contract for the tenderer submitting the most advantageous proposal.
Final Guarantee: This guarantee requires the company that is awarded with the contract for submitting the most economically advantageous tender, to respond to a possible default or defective performance of the contract. It must establish it within ten working days from the day following that on which the request is received by the contracting authority. The amount of the guarantee shall be 5% of the amount awarded, except in exceptional cases. The constitution of the definitive bond is prerequisite for award of the contract. If not constituted by the deadline, the contracting authority would proceed to award the contract to the company that has been following in the evaluation of tenders.
Its purpose is to ensure that the commitment to accept a contract in accordance with the offer established in the event that the offer was accepted. It is commonly used when access in desired contests or bids in other countries and in most cases are for access to Deals Contests-owned enterprises, government agencies, international organizations, etc. The amount is usually up to 10% of the value of the offer.
Its purpose is to guarantee the possible breach of the obligations under the contract established to date / s set for compliance therewith. Such guarantees are widely used in international trade because their use is very diverse. Used to supply contracts of goods, provision of services, operation of plant and machinery, etc.. As the tender security, usually a percentage between 10% and 20% determined on the main operation contracted.
It aims to ensure the beneficiary the return of advance payments made by him on account of a contract in the event the contract is not finally been completed. The clearest case of application of such guarantees is to cover the repayment of advance payments for goods supply contract, but is also applicable to other types of operations.
Covers the buyer of any defects or faults in the work or the equipment purchased, as well as breach of maintenance contract thereof by the seller. It remains in force until the work or equipment is definitely accepted by the buyer and the maintenance period ends.
These guarantees are born in case the seller request to the buyer an advance payment, the buyer thereby ensuring repayment of the amounts advanced in the event that the seller does not comply with the contract. Are issued prior to the deposit and is subject enters into force at the time the payment is made. The amount of security coincides with the advance payment or account.
This type is perhaps the most widely used, because it covers operations that usually occur more often. While all the aforementioned guarantees ensure payment / collection, give this specific definition as they often make this payment / collection regardless of what has happened to the main transaction.
As a rule, tend to be enforceable upon first demand, that is, against the simple requirement that the beneficiary indicates that it is fulfilled the secured transaction (sometimes with some other document: invoice, certificate, etc.) but not to be prove the veracity of breach of contract. A major risk factor for the payer, it could be forced to pay if the guarantee were executed, but by other means been paid out of the main operation. The clearest cases of application are:
- Ensure the provision of operations in another country risk (loans, credit accounts, etc.).
- Ensuring payment for supply of goods (can be on a specific operation or periodic delivery).
The first demand guarantees are an entirely separate contract of the transaction itself whereby the guarantor assures the beneficiary insurer pay the guaranteed amount to the first demand without a possibility of being required any evidence that has not been fulfilled the contract in which the guarantee was based.
The bond guarantees at first demand offer a number of advantages for the parties:
A) To the beneficiary (client abroad):
He knows he will receive the amount agreed in the contract of guarantee without presenting any evidence regarding the contractor or supplier has breached its contractual obligations.
B) To the guarantor (usually located in the country of the beneficiary):
Such guarantees at first demand does not give you any problems, as it does not have to study any legal documents of breach of contract to pay the beneficiary, then, to claim the principal (supplier), they usually only have to show that he guarantee against.
C) For the payer (supplying Spanish):
Obtaining a first demand guarantee will give a very good image in front of your foreign client, which will demonstrate its high competitiveness and security of full compliance with its contractual obligations. In addition, obtaining the guarantee through a ringside insurer demonstrates a seriousness and total confidence.
The only drawback I can discern in these guarantees is also for this last figure, the payer, since it will be forced to pursue legal action to claim the payment without justification possible foreign customer. That is, if the customer claims to the insurance guarantee, it will pay no evidence of a breach sue the payer, and it will have to take legal action to prove the claim unjustifiedness, supporting the costs of these actions.
Also, note that the first application guarantees are a host contract that arises independently of the secured obligation, which is why the exceptions relied by the payer (supplier) to the creditor beneficiary can not be referred to the legal relationship between debtor and creditor in the basic contract.
For critics of the guarantees at first demand, they raise the cost of operation to the payer and, above all, equality of balance of contract.
The first demand guarantees or first application is a creation of the international insurance practice, and virtually not regulated by any national law.
This figure has no specific regulation on our Spanish Trade Law. Only you can refer to the “guarantee by a guarantor”, which have pronounced judgments of the Supreme Court with reference to the first demand guarantees.
By Surety. Any tax, fee or payment to be carried out before any public administration: Whether corporation tax, VAT Tax Settlement, share to social security, and generally any other tax state, regional or local.
These guarantees are used within the European Union, as “Community transit guarantee.” With them it is allowed to transit goods by countries without clearance and settlement of customs duties.
TYPES OF GUARANTEES REQUIRED BY INSURANCE BENEFICIARIES OF SURETY
This is a contract between two parties to guarantee the guarantor will indemnify the insured for any loss payment by the issuer of the security may suffer. These agreements are governed by contract law and are used in transactions such as bonds and loans, etc.
Its primary purpose of securing or guaranteeing the payment of an obligation on the payer to the beneficiary as a result of operations of various types (such as defaults ensure Lending granted, unpaid commercial paper, etc.).
You can also replace any previously developed forms of guarantees. They are governed by the publication number 590 of the ICC, 06.Abr.98 approved and in force since 01.Ene.99.
The object may be varied, but the most popular purposes are: a “taking-over” where a company (usually parent), recognizes that another company (usually a subsidiary or investee) being processed or has handled a particular transaction risk, and that supports, without entailing its warranty or guarantee to the operation, sometimes are “letter of intent”, such as future capital expenditures, future capital injections or loans its subsidiary, etc.