What is Technical Endorsement? Definition of Technical Endorsement, Technical Endorsement Meaning and Concept

The technical guarantee is a type of guarantee that supports the fulfillment of a service that does not involve the disbursement of money.

This type of guarantee guarantees the delivery of a good or service. We refer, for example, to the construction of a public work within a specified period.

The objective of the technical guarantee is to attest to the ability of the guarantor to fulfill its obligations. In return, the supported company makes a payment that may include different types of commissions, which vary depending on the guarantor.

Difference between technical and financial guarantee

There are several differences between financial and technical guarantee. In the second, the guarantor is a seller or supplier.

On the other hand, the person who hires an economic guarantee is a buyer or a borrower, in the case of a commercial or financial guarantee, respectively.

Likewise, if a breach occurs, the guarantor of the technical guarantee does not assume the obligation to carry out the commitment contracted by the guarantor. Instead, pay compensation.

To understand it better, suppose that the construction of an Olympic stadium was being endorsed -for example- in one year. So, if after twelve months the work is unfinished, the guarantor does not have the responsibility to complete it.

In contrast, the guarantor of an economic guarantee is responsible for issuing the same disbursement that the debtor should make.

Example of technical guarantee

The technical guarantee is usual in the commitments contracted before public organisms. We refer, for example, to the concession of a road by the city council.

Then, the company in charge of the work must present a technical guarantee to the authorities. If the highway is not delivered within the agreed deadline, the state entity could execute the guarantee and receive compensation.

Likewise, the authorities require a financial guarantee in case the road does not meet the expected quality standards or if the costs of its construction exceed the estimated.