Article

Factual Summary: The Beneficiary executed a Cement Production Line Contract in Pakistan with the Principal of the Demand Guarantee. The Contract price is USD 26,679,520 and EURO 6,826,000.

The Principal procured two (2) unconditional and irrevocable bank guarantees to be issued in favour of the Beneficiary and guaranteed by a bank in the amount of USD 2,689,741.80 and EURO 707,600.00 with a 30 May 2008 expiry date. The aforesaid guarantee provides that, within 15 days after receipt of any indemnity notice indicating that the Principal had not fulfilled its obligations under the Contract, delivered by the Beneficiary pursuant to such guarantee within the validity period of the guarantee, the Bank Guarantor shall pay to the Beneficiary USD 2,689,741.80 and EURO 707,600.00 in maximum totally, without the requirement for collecting evidences from TCDRI, regardless of the potential disputes on the Underlying Contract. Disputes arose as to the performance of the underlying obligations of the Principal. The Beneficiary demanded the payment from the bank guarantor under the guarantees within the validity period of the guarantees i.e. 29 May 2008. The Principal asserted that the Beneficiary committed fraud in demand for payment under the guarantees concerned. The Beneficiary sought to eliminate that claim by emphasizing that the demand guarantees concerned are independent from the Underlying Contract.


Legal Analysis:

Second, certain evidence shows that the performance status of the equipment test is still inconclusive. The finding of the Appeal Court that there was no default on the part of TCDRI as to the supply of goods is correct. Despite raising objection to the finding of facts in the Judgment of the Second Instance, the Applicant for Retrial failed to produce evidence to prove that the Parties had reached any conclusion on the performance tests.

Third, the Beneficiary alleged in its statement of claim that the Principal was in breach of contract. However, the facts of the present case show that there was no default on the part of the Principal to support the demand for payment under the guarantees.

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This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.