Letter Of Guarantee

A Letter of Guarantee is a letter issued by a bank addressed to the beneficiary, guaranteeing the fulfillment of an obligation that the addressee has undertaken towards the beneficiary. In this article, the fields where the letter of guarantee is used, the legal nature of the letter of guarantee, its elements and types will be explained.

In business life, when traders do not have sufficient information about each other's ability to pay, the party who concerns about collecting their receivables from the other party may request guarantee. In these circumstances, letter of guarantee provides assurance to the creditor for the collection of receivables. Due to this need in business life, the scope of using the letters of guarantee is now beyond just commercial transactions. In fact, letters of guarantee can be used to stop execution proceedings, to participate in public tenders, to submit to custom authorities, and to obtain injunctions or attachment orders.