A warranty is also frequently described as an aval and constitutes the assumption of a risk by the financial institution towards a third party which is agreed upon in writing. An aval is an accessory undertaking to pay by a financial institute offering a guarantee to make a payment to the beneficiary of the aval and to make the payment instead of its client if a specific event agreed upon between the parties to the contract arises.
The customer receives a creditworthiness advantage through the financial institution‘s trust, avoids capital commitments and has a liquidity advantage as a result.
The most widely used types of sureties are:
- Performance warranty
- Service warranty
- Advance payment warranty
- Rental payment warranty
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