What is LETTER OF INDEMNITY?

A bank or insurance company promises by this written confirmation to act as a 3rd-party on behalf of the first party in a transaction or contract. This 3rd-party covers loss or damage to the 2nd-party in the agreement caused by the first party. Also known as indemnity bond.

TLD Example: The purchase of the new equipment could not be completed without a letter of indemnity from the bank supporting the buyer’s financial stability.

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