What are the types and terms of a bank guarantee?
Bank guarantees are essentially of two types. This distinction is based on the structuring of the bank guarantee. If the bank guarantee is not dependent on the main primary contract between the contracting parties, it is an unconditional bank guarantees. On the other hand, if the condition, precedent for invoking the bank guarantee, is related to the primary contract, it is a conditional bank guarantee. Hence, the distinction lies in the relation between the bank guarantee and the original contract. Terms of an unconditional bank guarantee: • Payment on demand of the beneficiary by the bank without any demur; • Disputes between parties are not to be taken into consideration when the bank guarantee is invoked; • The sole judge, whether there has been a breach is to be the beneficiary; • A written notice is a condition precedent to invoking the bank guarantee. A conditional bank guarantee generally includes a clause which stipulates certain conditions before which the guarantee may be in
