Verification aspects of Undated security cheque with signature verification letter and Bank Guarantees

Most of the business deals , customers required to give advance payment to the suppliers as per the payment term mentioned in the LPO. In these cases, customers will ask for Advance payment bank guarantee or Undated security cheque with signature verification from cheque issuing bank, if such terms are mentioned in the LPO.

Most of these cases customers prefer to collect Advance Payment bank guarantee from the suppliers because in this case the customer can easily and directly raise claims to bank for any  deviation from the LPO terms, such as fails to deliver the goods to customer, goods delivered but it is not as per the terms of the LPO and suppliers not willing to re-supply the goods as per the LPO. Etc. More over collecting Bank guarantee is more authentic than that of collecting Undated security cheque from suppliers.

In the case of undated security cheque , any deviations or discrepencies happens, then the customer can present the cheque to the  supplier’s bank clear the cheque.

Sometimes  supplier’s bank A/c  have no balance or the suppliers bank balance is not enough to honour the cheque, then the bank will dishonor the cheque.In such situation, the customer required to file legal case against the supplier to get the cheque amount and bouncing of cheque with some compensation for the damages.

Verification aspects of undated security cheque

While collecting the undated security cheque with signature verification , Customers required to consider  the following  points to verify the authenticity of the undated security cheque .such as:-

1)Ensure that the cheque is an undated one other wise it’s validity will restricted for a period of 6 months. So always ensure that security cheque should be undated one.

2) Name of the cheque should in the name of the customer who give advanced cash to customer.

3)Verify the signature with the signature letter from the bank.

4)Cheque amount should be  equal to the advance amount paid to the suppliers.

5)Verify the Bank Account and ensure that the said bank A/c is active and valid in all aspects 

           

Verification aspects of undated Bank Guarantee

While collecting the bank guarantee , Customers required to consider  the following  points to verify the authenticity of the bank guarantee such as:

 1) Bank guarantee should addressed to the customer’s name.

          2) Bank Guarantee should mention guaranteed amount.

      3) Bank guarantee should mention the validity date or expiry date of the  guarantee.

      4)Bank guarantee should mention the LPO NO and other document details  relevant for the transaction.
         

              

BANK GUARANTEE - INTRODUCTION

Bank guarantee is a promise from bank or any  finanacial institution that they will honour  the  agreed finanacial  obligation incase the clinet not full fill the same. It is actually a facility provided by banks to it’s clients  and this facility have some agreed  maximum limit say 1 million or 2 million etc.

Bank Guarantee  issuing  for a specific period of time. For eg  3 months, 6 months , 1 year etc… or up to certain specific date (  eg.up to 31march 2017 ). Once the bank guarantee completed  it’s  validity period or maturity period, then such bank guarantee required to  renewed for further period  , if  required.

Once the validity of bank Guarantee expired, then such Bank Guarantee have no legal validity and the holder of that bank guarantee can’t claim to the bank for the  guaranteed amount  for  the breach of duty  or non performance from client. So validity of bank guarantee is one of the most important thing while maintaining a bank guarantee.

Bank guarantee should be for a specific person. That means in the bank guarantee it’s self mention the name of the ‘’beneficiary of the bank guarantee ‘’. So only that specific beneficiary can claim for the guaranteed amount from the bank.

Advance payment bank Guarantee,  Performance Bank Guarantee,  Retention bank guarantee, Tender Bond etc are some of the commonly used bank guarantees.

Each type of bank guarantees are used for separate specific purposes. 

Examples:-

1)Tender Bonds used for submitting tenders for getting any new contract  or project.

2)Advance Payment Bank Guranatee  used as a security against Advance Amount paid.

3)Performance Bank Guatantee used as a security  for the proper performance of the contract or delivery of goods.

4)Retention Bank Guarantee used as a security for the earlier  release of retention money .