1. Independent Bank Guarantees in the UK
INTERLEGES
Independent Bank Guarantees in the UK

2. Independent Bank Guarantees
About Guarantees
Types of Guarantees
International trade and Guarantees
Fraud exception
Case Studies
Q&A

3. About Guarantees Common Law: A creditor A principal debtor
A guarantor who undertakes to be liable to the creditor if the principal debtor fails to discharge his obligation.
Secondary obligation
Release of guarantee

4. Types of Guarantees On demand guarantee Payable upon demand
Unconditional
Conditional guarantee
Payment obligation triggered by non performance of an underlying obligation

5. International Trade and Guarantees International Trade: Guarantees
Very rarely guarantees in the “Common Law” sense, ie. secondary obligation.
Normally a primary and independent undertaking to pay if the provisions of the guarantee are fulfilled.
Autonomous

6. International Trade and Guarantees
Bank guarantee procured by the buyer:
Payment protection, ie. “Reliable paymaster”
Bank guarantee procured by the seller:
Protect claim for damages for non- delivery of goods, defective goods etc.

7. 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.

8. 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.

9. 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

10. Fraud Exception Situation 3:
The guarantor has positive proof of fraud and that the beneficiary knew of the fraud.
The guarantor should not pay

11. Case Studies What type of guarantee is it?
Challenges to the guarantee itself
Contesting the demand
The use of injunctions
Recent Royds experience

12. Q&A Q & A: Claus Andersen E cka@royds.com Stewart WilkinsonE
Tel: +44 (0)
I royds.com