Contingent Guarantee
A guarantee of payment that is dependent on one or more future events. Investopedia Says:
Here's an example of a contingent guarantee: say a bank writes a guarantee of payment on behalf of one of its customers, who in turn uses the guarantee to secure a transaction with a vendor. This is a contingent guarantee because the bank is required to make payment only if its client forfeits on the payment. This type of guarantee is often used when a seller does business in an unfamiliar country, in an attempt to reduce the probability of the other party defaulting. Related Terms:
Contingent Asset
Contingent Liability
Creditor
Debtor
Lien
Unsecured Creditor |