Refund guarantee

A refund guarantee is a bank guarantee securing the buyer’s pre-delivery installments under a shipbuilding contract, repaying them with interest if the yard fails to deliver or the buyer lawfully cancels. Shipbuilding payments are staged against milestones, steel cutting, keel laying, launch, and delivery, so a buyer may pay 40 to 60 percent before the ship exists; the refund guarantee protects that exposure to yard default or insolvency. It is normally a first demand guarantee from the yard’s bank, and its availability and cost shape whether a newbuilding order can be financed. Disputes turn on whether the demand is conforming.