A Comparative Analysis of the Approach to the Conformity of a Supporting Statement Calling for Payment Under Demand Guarantees
DOI:
https://doi.org/10.17159/1727-3781/2022/v25i0a14060Keywords:
Call for payment, demand, demand guarantee, strict compliance, statement of breach, supporting statement, compliance, conformity, high levelAbstract
The core requirement of a demand guarantee is to receive payment through the delivery of documents or a call for payment that meets the requirements of the demand guarantee. The call for payment may be accompanied by a declaration alleging a breach of the underlying agreement or a statement with full particulars of the breach. However, the extent to which the data in the supporting statement or statement of breach must comply with the guarantee requirements is not always entirely clear. Over the years, a strict standard of compliance of the statement with the terms of the guarantee has been employed. This has threatened the commercial use of demand guarantees due to demands for payment being rejected. This article draws upon the approach in resolving the problems related to the conformity of a statement accompanying the call for payment through an analysis of international instruments applicable to demand guarantees (the Uniform Rules for Demand Guarantees (URDG758); the International Standby Practices (ISP98); the United Nations Convention on Independent Guarantees and Standby Letters of Credit (UNCITRAL Convention); the Supreme Court of the People's Republic of China Letter of Credit Rules (Chinese LC Rules); the Provisions of the Supreme People's Court of the People's Republic of China on Several Issues Concerning the Trial of Disputes Over Independent Guarantees (Chinese IGP), the recently issued International Standard Demand Guarantees Practice (ISDGP) and international case law in an attempt to find the most feasible approach for South African law. A supporting statement accompanying a call for payment is conforming if it indicates the event triggering the guarantor's obligation to pay as specified in the demand guarantee. Furthermore, in ascertaining whether a supporting statement is compliant, a technical interpretation of the terms of the guarantee should be avoided in favour of one that advances the common intention and purpose of the guarantee.
Downloads
References
Bibliography
Literature
Bergsten EE "A New Regime for International Independent Guarantees and Standby Letters of Credit: The UNICITRAL Draft on Guarantee Letters" 1993 International Lawyer 859-879
Bertrams R Bank Guarantees in International Trade: The Law and Practice of Independent (First Demand) Guarantees and Standby Letters of Credit in Civil Law and Common Law Jurisdictions 3rd ed (Kluwer Law International The Hague 2004)
Bridge M (ed) Benjamin's Sale of Goods 9th ed (Sweet & Maxwell London 2014)
Byrne JE Letter of Credit Rules and Laws: Critical Texts for Independent Undertakings 6th ed (Institute of International Banking Law and Practice Montgomery Village 2014)
Byrne JE The Official Commentary on the International Standby Practices (Institute of International Banking Law and Practice Montgomery Village 1998)
Byrne JE Standby and Demand Guarantee Practice: Understanding UCP600, ISP98 & URDG 758 (Institute of International Banking Law and Practice Montgomery Village 2014)
Chivizhe T A Comparative Study of the Law and Practice Relating to the Compliance of Documents Calling for Payment Under Letters of Credit and Demand Guarantees (LLD-thesis North-West University 2021)
Chuah J Law of International Trade: Cross-Border Commercial Transactions 5th ed (Sweet & Maxwell London 2010)
Enonchong N The Independence Principle of Letters of Credit and Demand Guarantees (Oxford University Press Oxford 2011)
Hapgood M Paget's Law of Banking 13th ed (LexisNexis London 2007)
Hugo C "Bank Guarantees" in Sharrock R (ed) The Law of Banking and Payment in South Africa (Juta Cape Town 2016) 437-458
Hugo C "Demand Guarantees: Insights from the People’s Republic of China" in Hugo C and Kelly-Louw M (eds) Jopie: Jurist, Mentor, Supervisor and Friend – Essays on the Law of Banking, Companies and Suretyship (Juta Cape Town 2017) 129-132
Hugo CF "Letters of Credit and Demand Guarantees: A Tale of Two Sets of Rules of the International Chamber of Commerce" 2017 TSAR 1-20
Hugo C "Conformity of Demand Submitted Under Independent Guarantees Case Law" 2018 TSAR 680-690
Hugo C "Demand Guarantees in The People's Republic of China and the Republic of South Africa" 2019 BRICS Law Journal 4-32 DOI: https://doi.org/10.21684/2412-2343-2019-6-2-4-32
Kelly-Louw M Selective Legal Aspects of Bank Demand Guarantees: The Main Exceptions to the Autonomy Principle (LLD-thesis University of South Africa 2009)
Kelly-Louw M "Construction of Demand Guarantees Gone Awry" 2013 SA Merc LJ 404-410
Kelly-Louw M "The Doctrine of Strict Compliance in the Context of Demand Guarantees" 2016 CILSA 85-129
Kelly-Louw M "Must All the Required Documents for a Demand Guarantee Be Presented at the Same Time? Kristabel Developments (Pty) Ltd v Credit Guarantee Insurance Corporation of Africa Limited" 2017 THRHR 148-164
Marxen K Demand Guarantees in the Construction Industry: A Comparative Legal Study of their Use and Abuse from a South African, English and German Perspective (LLD-thesis University of Johannesburg 2017) DOI: https://doi.org/10.5771/9783845293158
Case law
Compass Insurance Company Limited v Hospitality Hotel Developments (Pty) Ltd 2012 2 SA 537 (SCA)
Denel Soc Ltd v Absa Bank Ltd 2013 3 All SA 81 (GSJ)
Dormell Properties 282 CC v Renasa Insurance Company Ltd 2011 1 SA 70 (SCA)
Frans Maas (UK) Ltd v Habib Bank AG Zurich [2001] Lloyd's Rep 14
Group Five Construction (Pty) Ltd v Member of the Executive Council for Public Transport, Roads and Works Gauteng 2015 5 SA 26 (GJ)
Group Five Construction (Pty) Ltd v Member of the Executive Council for Public Transport, Roads and Works Gauteng 2015 5 SA 57 (SCA)
Guardrisk Insurance Company Limited v Kentz (Proprietary) Limited 2014 1 All SA 307 (SCA)
IE Contractors Ltd v Lloyds Bank plc and Rafidain Bank [1990] 2 Lloyd's Rep 496 (CA)
Kristabel Developments (Pty) Ltd v Credit Guarantee Insurance Corporation of Africa Limited (23125/2014) [2015] ZAGPJHC 264 (20 October 2015)
Lombard Insurance Co Limited vs Landmark Holdings (Pty) Ltd 2010 2 SA 86 (SCA)
Lombard Insurance Co Limited v Schoeman 2018 1 SA 240 (GJ)
MUR Joint Ventures BV v Compagnie Monegasque De Banque [2016] EWHC 3107 (Comm)
Rainy Sky SA v Kokmin Bank [2011] UKSC 50, [2012] 1 Lloyd's Rep 34 (SC)
Sea-Cargo Skips AS v State Bank of India [2013] 1 Lloyd's Rep 477 (QB)
Siporex Trade SA v Banque Indosuez [1986] 2 Lloyd's Rep 146 (QB)
South Lanarkshire Council v Coface SA [2016] BLR 237 (Inner House, Extra Division)
State Bank of India v Denel SOC Ltd 2015 2 All SA 152 (SCA) DOI: https://doi.org/10.18356/6351ba95-en
Stefanutti & Bressan (Pty) Limited v Nedbank Limited (5311/2008) [2008] ZAKZHC 50 (30 July 2008)
International instruments
ICC International Standard Demand Guarantee Practice for URDG758, ICC Publication No 814E (2021)
ICC Uniform Rules for Demand Guarantees, ICC Publication No 758 (2010)
International Standby Practices, ICC Publication No 590 (1998)
Provisions of the Supreme People's Court of China on Several Issues Concerning the Trial of Disputes Over Interpretation of Independent Guarantee Provisions (2017)
Rules of the Supreme People’s Court of China Concerning Several Issues in Hearing Letter of Credit Cases (2006)
United Nations Convention on Independent Guarantees and Standby Letters of Credit (1996)
Internet sources
UNCITRAL Secretariat 1996 https://uncitral.un.org/sites/uncitral.un.org /files/media-documents/uncitral/en/guarantees.pdf
UNCITRAL Secretariat 1996 Explanatory Note by the UNCITRAL Secretariat on the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit https://uncitral.un.org/sites/uncitral.un.org/
files/media-documents/uncitral/en/guarantees.pdf accessed 15 December 2021 13-25
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Tinaye Chivizhe
This work is licensed under a Creative Commons Attribution 4.0 International License.
.png){kind=spacer}