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Factual Summary: Tongfang as the project employer executed a Supply of Non-standard Equipment and Construction & Installation Project Contract with Hebei Zhongrui Construction Group Co,.Ltd (Hereinafter referred to as Zhongrui) as the contractor. SCGT issued performance guarantee for the said Contract in the amount of RMB 2,298,000, which provides that the guarantee is unconditional and irrevocable, SCGT shall make payment to Tongfang upon claim of default by Tongfang regardless of any objection raised by Zhongrui.

The performance guarantee issued by SCGT contains express independent undertaking for guarantee, such undertaking is not applicable for domestic business. Therefore, the agreement as to the independence of the guarantee is invalid. Denial of the independent guarantee means the independence and abstract nature shall not be sustained, while considering the said performance guarantee was issued for the Supply of Non-standard Equipment and Construction & Installation Project Contract between Tongfang and SCGT, which means the performance guarantee of SCGT shall not be wholly invalid, the guarantee liability of SCGT still exists, and the validity of the guarantee contract shall be determined pursuant to the Master Contract and other provisions of the performance guarantee. The guarantee liability of SCGT shall be ascertained in accordance with the determination of the validity of the Master Contract and the degree of fault. The present case involves the determination of the validity of the Master Contract, which shall be subject to arbitration, and the Court has no jurisdiction. Therefore, Tongfang shall ascertain the validity of the Master Contract and the amount payable in advance, and then claim the guarantee liability thereof against SCGT. The assertion of Tongfang against SCGT on the grounds of the independent guarantee undertaking by SCGT in the performance guarantee could not held by the Court. Appeal dismissed, affirmed.

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