ICC Digital Library Forum

Hi, colleagues,
Hopefully you can give me an urgent advice regarding guarantee.

We issued direct first demand urdg-guarantee and received otherwise correct demand under it except for:
1) demand does not show the number and date of underlying contract, only referres to some articles of this unmentioned contract. Same time it correctly shows the number of our guarantee. By the way, our guarantee text quotes the number and date of contract. Can I refuse the payment according to article 20(a)?
2) advising bank sent us mt799 advising us that they have sent us by fax all the demand documents the day before expiry of guarantee. And that the originals were sent to us, too. But the fax and originals never arrived on time but one day after expiry date. Can I refuse the payment according to article 19? And what if our fax was broken the day the demand was supposedly sent and we didn't receive it because of that?

Your opinions regardin my questions are highly appreciated!

Irene,

I am assuming this is a direct guarantee (a guarantee your bank has issued) and not an indirect guarantee (a guarantee issued by another bank against your bank’s counter-guarantee).

Re:

1. What exactly does the guarantee say regarding the contents of a demand? (I would anticipate that this would be the overriding factor and not Article 20, but the facts may prove the contrary.)

2. Assuming the demand was definitely not received on or before expiry it is not complying per Article 19.

With respect to your facsimile meachine being broken, I imagine the position would be governed by the applicable law and whether or not facsimile demands were permitted by the guarantee. Article 12 may well be relevant to the former and sub-Article 2(d) & Opinion 587rev to the latter if the guarantee was silent regarding means of demand.

Jeremy

[edited 8/17/2006 10:48:14 AM]

Dear Jeremy,
thank you for your reply.

Yes, this is a direct guarantee(from our bank to the beneficiary).

Guarantee text did not specifically allow fax demands, but beneficiary's demand was backed with mt799 from bene's bank where they confirmed the authenticity of the claim (and signee).

Claim description in the text reads: quote /.../ guarantee you the payment of any sum or sums /.../ upon receipt by us of your first written demand accompanied by your written confirmation stating that the principals are in breach of their obligations under the contract and explaining in which respect the principals are in breach. unquote

Irene,

On the face of it your guarantee did not expressly require the number and date of the underlying contract to be quoted in a demand. As the guarantee no. was correctly quoted I do not see obvious grounds for considering the demand statement as non-compliant.

With respect to the permissibility of a facsimile demand -where an authenticating teletransmission had also been sent- received on or before expiry, I cannot say for certain if it would be complying or not. It would very much be a question of applicable law (Estonian?) I believe.

My inclination would be to ignore this issue and rely on Articles 12 & 19 to refuse the demand if not received until after expiry.

Regards, Jeremy

[edited 8/17/2006 12:57:38 PM]

Thanks, Jeremy.
We have decided to honour this demand and ignore the omission of contract number excactly because our guarantee number was clearly indicated and therefore it was linked with underlying contract.
(And we found the missing fax sent one day before expiry date to our bank Some documents have their mysterious ways before arriving to their destination.)