On-Demand Bond: How It Works

One of the main frequent problems in international construction projects (and more generally in the international commerce) is represented by the issue of bonds or guarantees that the Employer requests to secure the performance of the contract.

The purpose of said bonds is to guarantee the Employer that he will recover any loss or damage that it might suffer as a consequence of the breach of the Contractor.

When dealing with such bonds, one of the first points to analyse is whether the guarantee is a conditional or instead of an on-demand bond.

Under certain jurisdictions (for instance under English Law) there is a difference even between the terms 'bond' and 'guarantee', while for the purpose of this note we will use the two terms as synonymous.