By Chang-Soon Thomas Song, Esq.  

Every day banks around the world handle bank guarantees facilitating the carrying out of contractual obligations between international parties. The bank guarantee is a simple mechanism whereby once the beneficiary declares to the issuing bank of the guarantee that the applicant has failed to fulfill his contractual obligations (a default statement)，payment is made by the issuing bank.

Although the amounts of bank guarantees can be quite large，ranging from thousands of dollars to millions of dollars，requests for payment under a bank guarantee are rarely made. When the exceptional request for payment is made，the issuing bank makes payment within a reasonable period of time. There is no refusal to pay based on some discrepancy in the request for payment.