Demand Guarantee
Categories: Econ, Company Management, Financial Theory
On The Big Bang Theory, Penny is able to get Leonard to perform numerous acts by withholding personal, um, affection...and hiding his flash drive until he complies. (Okay, it was Sheldon's.) She holds something less significant hostage to ensure she gets the larger payoff. So it goes with the demand guarantee.
One of the standard practices of accountants and attorneys is to charge a retainer to protect against their doing work for a client who refuses or defaults on paying their final bill.
Among the remedies for dealing with delivery risk is a performance bond, also referred to as a bank guarantee or a demand guarantee. The demand guarantee compensates a predetermined amount to the buyer if the seller fails to deliver a contractually obligated shipment. The seller will be required to pay back the issuer (usually a bank) for the guarantee if the funds were not prepaid by the seller.