Financial guarantees

There are three types of financial guarantee:

1) Guarantee deduction

Where the contract makes provision for a certain guarantee period following delivery or acceptance (the contractual guarantee) the Administration is authorised to instruct the public accounting agency to withhold a guarantee deduction that is not to exceed 5% of the value of the contract.

The contractor may ask for this type of guarantee to be replaced by a first call guarantee or by a binding personal security.

2) The first call guarantee and the binding personal security

These are two procedures whereby a contractor offers the Administration the support of a credit institution to underwrite its commitments to the Administration.

The first call guarantee stems from the contract signed between the person or institution service as guarantor and the beneficiary, or creditor, on request from the principal, or debtor.

The guarantor agrees to pay a given sum to the beneficiary when the beneficiary first calls for it, without disputing the request for any reason.

This differs from the security arrangement in that it is independent of the original contract linking the creditor to the debtor, and the guarantor cannot invoke any of the exceptions that the contractor has at his disposal.

3) The binding personal security

The binding personal security is, as it implies, an accessory personal surety created by a unilateral contract that requires the person service as security to pay the principal debtor’s debt and gives him the right to claim reimbursement against the debtor.

The company must contact its banking institution and examine the proposed arrangement and the cost of this service provided by the bank.