Advance Payment Guarantee (APG) is to assure the buyer or project owner that the advance payment they make to the supplier or the contractor will be refunded by the guarantee issuing bank on behalf of the supplier or contractor if the contractual obligations are not fulfilled. This reduces the risk for the buyer in case the contractor fails to deliver the goods or services as agreed.

Advance Payment Guarantees are usually valid for a specified period, which is determined based on the terms of the contract or agreement between the parties. The validity period typically expires upon completion of the contract or delivery of the goods or services.

The guarantee may specify the conditions under which the buyer can invoke the guarantee, such as non-delivery of goods, delays in delivery, or failure to meet quality standards. The buyer must provide evidence of the contractor’s non-performance to trigger the refund process.

The most secured bank guarantee should be:

• Irrevocable
• First demand
• Unconditional
• Extendable

If the works of the project or the supply of the goods will be performed gradually then the bank shall have the right to reduce the guaranteed Sum by the value of work performed, proportionally.