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On Demand Bond

On-Demand Bond

Definition

An unconditional bond or bank guarantee required of many contractors and sellers by overseas buyers to guarantee the tender (the actual form of money exchanged) as security against the value of advance payments under a contract, or to guarantee performance of the contract. Payable "on demand," these bonds and guarantees may be called even when the contract has not been breached or when the breach is caused by circumstances outside the contractor's or seller's control, such as a trading embargo.

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