Advance Payment Guarantee or Advance Payment Bond is a form of monetary guarantee in advance payments that will be returned if the party receiving them does not perform according to the terms and conditions preset for the contract. They are also referred to as APGs.
Usually, construction and other engineering companies require these bonds for guaranteeing the expected outcome that meets the quality agreed upon. In business, these guarantees are deemed extremely necessary because without them ensuring timely delivery and promised quality would have never been achieved.
Advance payment bonds are the token of the strict promise service providers make and the recipients make sure that they are delivered on point. Export-import, construction works etc. can include these sorts of guarantees.
For example, if a buyer preorders any product to be shipped to him/her from overseas and the seller demands an advanced payment for product processing and overseas shipping (which is an advance payment guarantee), s/he will be obligated to refund the advance payment if and when the product does not get delivered or a wrong product is shipped.
Use of the Term in Sentences
- As terms and conditions, an advance payment guarantee should be clearly specified in writing with the necessary currency and monetary unit so that misunderstandings and fraud can be avoided.