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INTERLEGES
Independent Bank Guarantees in the UK
Independent Bank Guarantees
• About Guarantees
• Types of Guarantees
• International trade and Guarantees
• Fraud exception
• Case Studies
• Q&A
About Guarantees
• Common Law:
1.A creditor
2.A principal debtor
3.A guarantor who undertakes to be liable to the creditor if the principal debtor fails to discharge his obligation.
• Secondary obligation
• Release of guarantee
Types of Guarantees
• On demand guarantee
1.Payable upon demand
2.Unconditional
• Conditional guarantee
1.Payment obligation triggered by non performance of an underlying obligation
International Tradeand Guarantees
• International Trade:
• Guarantees
1.Very rarely guarantees in the “Common Law” sense, ie. secondary obligation.
2.Normally a primary and independent undertaking to pay if the provisions of the guarantee are fulfilled.
3.Autonomous
International Tradeand Guarantees
1. Bank guarantee procured by the buyer:
• Payment protection, ie. “Reliable paymaster”
1. Bank guarantee procured by the seller:
• Protect claim for damages for non- delivery of goods, defective goods etc.
Fraud Exception
• Under a guarantee the guarantor must pay the guaranteed amount once it has been presented with a demand in accordance with the guarantee.
• The guarantor should not concern itself with the underlying contract.
• Exception: fraud. • Three sets of circumstances must be
distinguished in this regard.
Fraud exception• Situation 1:• Fraud is only an allegation or a suspicion
• For example the allegation may be made by the seller or the guarantor suspects fraud.
• In this event the guarantor should pay.
Fraud Exception
• Situation 2:
• Fraud has clearly been established to the satisfaction of the guarantor. For example by way of a forged document.
• But there is no evidence that the beneficiary knew of the fraud.
• The guarantor must still pay
Fraud Exception
• Situation 3:
• The guarantor has positive proof of fraud and that the beneficiary knew of the fraud.
• The guarantor should not pay
Case Studies
• What type of guarantee is it? • Challenges to the guarantee itself• Contesting the demand • The use of injunctions • Recent Royds experience
Q&A
Q & A:Claus AndersenE [email protected] WilkinsonE [email protected]
Tel: +44 (0) 20 7583 2222 I royds.com