Practical Law UK Glossary 1-107-6927 (Approx. 3 pages)
Glossary
On-demand bond
Also referred to as a demand bond or (confusingly) a demand guarantee, even though it is not a guarantee in English law.
A document that imposes a primary obligation on the issuer to pay the beneficiary on its first demand (or on demand) where the primary obligor fails to perform a specified contractual obligation owed to the beneficiary. The issuer's obligation is not affected by disputes relating to the underlying contract between the beneficiary and the primary obligor, and the beneficiary is usually entitled to payment simply on submitting a statement to the issuer that the primary obligor has failed to perform a specified obligation under the contract. The obligation under the document is independent from the underlying contract which it relates to and operates strictly in accordance with its terms.