Bank guarantee or guarantee commitment is a document issued by the guarantor or counter-guarantee or the guarantee-confirming party in the form of a Letter of Guarantee or a Guarantee Contract

1. How Bank Guarantee Letter Could Help Secure a
Transaction and Risks Involved?
In the process of performing civil transactions, there is a need to bind the performance
of obligations of the parties hence secured transaction is needed and guarantee is one of
the commonly used methods to secure the performance of obligations in business and
commercial activities. The party that provides guarantee is normally a commercial
bank and bank guarantee is normally a loan service. In reality, there are potentially
many risks involved in the guarantee transaction through issuing of bank guarantee
letter which needs the attention of dispute lawyers in banking and finance to provide
legal advice throughout the process.
Bank guarantee or guarantee commitment is a document issued by the guarantor or
counter-guarantee or the guarantee-confirming party in the form of a Letter of
Guarantee or a Guarantee Contract. Thus, a letter of bank guarantee is understood as a
written commitment of the bank to the guarantee recipient that the bank will perform
financial obligations on behalf of the guaranteed party when the guaranteed party fails
to perform or not fulfilling the obligations committed to the guarantee recipient. In case
the parties choose the form of counter-guarantee or guarantee confirmation, the letter
of guarantee shall include the written commitment of the counter-guarantee issuing
party to the guarantee, or of the guarantee-confirmation issuing party to the obligee.
When a guarantee obligation arises, the obligee must send a written request for the
performance of the guarantee obligation, enclosed with the documents agreed upon in
the guarantee commitment, to the guarantee-executing bank. The request for
performance of guarantee obligations is considered valid when the bank receives it

2. within the working time of the bank and within the valid guarantee commitment period.
In case the request for performance of the guarantee obligation is sent in the form of a
registered letter via the public postal network, the date the guarantor receives the request
is the date of signing and receiving the registered letter.
Within 5 working days from the date the guarantor bank receives a valid written request
for performance of the guarantee obligation, the guarantor shall be responsible for
properly and fully performing the promised guarantee obligation for the with the
guarantor. In case the guarantor bank refuses to perform the guarantee obligation, within
5 working days after receiving the request to perform the guarantee obligation, the bank
must reply in writing clearly stating the reason for the refusal. In case of payment in
foreign currency, credit institutions, foreign bank branches shall debit that foreign-
currency sum to the mandatory lending account.
Credit institutions, or foreign bank branches, shall agree on the guarantee-issuing fee
amount paid to customers. In case of a counter guarantee or guarantee confirmation, the
guarantee-issuing fee amount shall be agreed upon by parties on the basis of the
guarantee-issuing fee amount approved by the obligor. If the guarantee currency is
foreign one, parties shall agree on collecting the guarantee-issuing fee by accepting that
foreign currency or converting that foreign currency into Vietnam at the sell rate defined
on the fee collection or fee collection notification date.
Disputes could arise from many situations, for example, there is a case of issuing a false
letter of guarantee because an individual in the bank violates the law, or the bank officer
signs a letter of guarantee without proper authorization from the legal representative of
the bank, or letter of guarantee is in violation of form according to the regulation of
state bank. In addition, if a conditional letter of bank guarantee is applicable, a dispute
may arise from an understanding of whether or not the conditions for the guarantee have
been met. In many cases, there might need to be a lawsuit to determine the conditions
fulfilment of the guarantee and such might be lengthy and costly. Therefore, the parties
involved in the guarantee transaction might need to consult a lawyer with expertise in
banking disputes to check the legitimacy and validity of the letter of bank guarantee and
the possibility to be guaranteed when the conditions are met.
Source ANT Lawyers: https://antlawyers.vn/library/how-bank-guarantee-letter-
could-help-secure-a-transaction-and-risks-involved.html