Lapasar
Contracts & Pricing

Bank Guarantee

A bank guarantee is a promise from a bank to pay a beneficiary a stated amount if the bank's customer fails to meet a defined obligation.

WhatsApp us rfqme@lapasar.com

In trade and procurement, a bank guarantee gives the buyer or seller assurance that they will be compensated if the other party defaults. Common types include performance guarantees, advance-payment guarantees and bid or tender guarantees, each covering a specific risk in the transaction.

Because the bank stands behind the obligation, a guarantee reduces counterparty risk and can substitute for a cash deposit, freeing up working capital. In Malaysia, bank guarantees are widely used in construction, tenders and supply contracts, and their amount, validity and claim conditions are specified precisely so both parties know when the guarantee can be called.

Frequently asked questions

What is a bank guarantee?
A bank guarantee is a bank's promise to pay a beneficiary a set amount if its customer fails to meet a defined obligation, reducing counterparty risk in a transaction.
What is a bank guarantee used for in procurement?
It secures obligations such as contract performance, advance payments or tender bids, giving the other party confidence and often replacing the need for a cash deposit.

Go deeper

B2B trade financing

Explore related across the knowledge graph

GuideContract managementThe discipline that turns a negotiated agreement into delivered value — keeping contracts used, monitored and renewed on time.TemplateContract Register TemplateAn Excel register to track every supplier contract, its value and renewal dates, with automatic expiry alerts.GlossaryCall-Off OrderA call-off order is an individual order placed against an existing framework agreement or blanket purchase order to draw down agreed goods or services as needed.GlossaryContract AwardContract award is the formal decision to appoint a chosen supplier and enter into a contract after a sourcing or tender process concludes.GlossaryContract ComplianceContract compliance is the degree to which purchasing actually follows the prices, terms and conditions set out in agreed contracts.GlossaryContract Lifecycle Management (CLM)Contract lifecycle management (CLM) is the structured management of a contract through every stage, from drafting and negotiation to renewal or expiry.GlossaryContract ManagementContract management is the process of creating, executing, tracking and renewing supplier contracts to ensure both sides meet their obligations and value is realised.GlossaryContract NegotiationContract negotiation is the process of discussing and agreeing the price, terms and conditions of a contract before both parties sign.GlossaryContract RenewalContract renewal is the process of reviewing and extending a contract as it approaches expiry, either on the same terms or on renegotiated ones.GlossaryContract VariationA contract variation is a formal change to the agreed scope, price, timeline or terms of an existing contract, made with both parties' consent.GlossaryCost-plus ContractA cost-plus contract pays the supplier for its allowable costs plus an additional agreed amount for profit, rather than a single fixed price.GlossaryDiscount StructureA discount structure is the set of rules a supplier uses to reduce list prices, based on factors such as volume, order value, payment timing or customer tier.GlossaryEvergreen ContractAn evergreen contract is an agreement that automatically renews at the end of each term unless one party gives notice to cancel or change it.GlossaryFixed-price ContractA fixed-price contract sets a single agreed price for defined goods or services regardless of the supplier's actual costs to deliver them.GlossaryForce MajeureForce majeure is a contract clause that excuses a party from its obligations when an extraordinary event beyond its control prevents performance.
Back to the procurement glossary

AI-first procurement software. Live marketplace. Human services.

Put procurement theory into practice

Walk through the AI-first procurement software on your own approval matrix, see the live marketplace behind it, and meet the sourcing team that works your RFQs and reverse bids.

Request a demoExplore the software

Prefer to talk to a real person?

Our team replies fast on WhatsApp and email — no forms, no waiting.

WhatsApp us rfqme@lapasar.com

Operating model · diagram

  1. 01

    AI-first software

    AI-first procurement software for long-tail spend

  2. 02

    Live marketplace

    A live B2B marketplace

  3. 03

    Human services

    Human sourcing and support

  4. 04

    Optional add-on

    Fulfilment support for merchants