bank guarantees in international trade
Guarantees have been used to support contractual undertakings of many kinds for hundreds of years. Traditionally domestic guarantees, ie those used within a single jurisdiction, have been of the surety type ('caution', 'fideussione', 'burgschafft') where the guarantor undertakes to pay when and only to the extent that the party for whom the guarantee is given is liable to the beneficiary of the guarantee. This remains the standard mechanism used in most domestic construction contracts, for example.
In international transactions, however, in response to the broader risk spectrum generated by the contractors' locations in different jurisdictions, parties seeking guarantees have, for the last 30 to 40 years, increasingly sought different forms of guarantee. These have been described as 'pay first, argue later' undertakings because the guarantor will pay against a demand from the beneficiary rather than upon proof that the party for whom the guarantee was given is, in fact, liable to the beneficiary.
This course explores in detail the interrelationship between the different forms of guarantee and the legal consequences that follow from them. It also addresses specific problem areas such as ineffective expiry dates, 'pay or extend demands', hybrid guarantees and considers in depth the ICC rules for these instruments.