sub-article 23 (a),(b)

loankim · Post by **loankim** » Mon Jan 17, 2011 9:29 am

Dear All,

According to Article 5 , the counter-guarantor isnt a party involed in the guarantee, and the guarantee is is independent to counter-guarantee.
So my question is :
Can the guarantor after receiving the extent or pay demand from the beneficiary under the guarantee and agree to extend BUT the guarantor then made a pay demand under the counter-guarantor to the counter-guarantor ? ( he can have a benefit in delaying payment under the guarantee )
Can i treat above action of the guarantor as breaking the rule sub-art 23a and b URDG 758 ?!
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+ The first thought:
After receiving an extend or pay request under the guarantee, the guarantor must make a demand on the counter-guarantor in the same way, it means that’s also an extend or pay demand.
If the guarantor only presents a pay demand, his acting against the spirit of sub-art 23( a )(b) and international banking practice.
+ The second thought :
The guarantor can do so because the counter-guarantee and the guarantee are independent. Furthermore, Article 23 does not insist that the guarantor should also offer “EXTEND” to the counter-guarantor.
Please note Article 23b uses the phrase “as an alterntive”.
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I would like to see your comments on my above thoughts ?!

Many thanks advance.

Best regards,

abrar · Post by **abrar** » Mon Jan 17, 2011 11:19 pm

The simple answer is that such an act would be in violation of Article 16, which makes it compulsory for the Guarantor to advise the Counter-Guarantor of any "extend or pay" claims.