sub-article 23 (a),(b)

With the introduction of Uniform Rules for Documentary Guarantee or URDG 758, the rules for Documentary Guarantee seem to be popular again. It can be imagined from the increasing number of questions that have popped up in recent days. Documentary Guarantee Forum is an effort to develop a platform to discuss these questions.
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sub-article 23 (a),(b)

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 ?!
+ 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”.
I would like to see your comments on my above thoughts ?!

Many thanks advance.

Best regards,

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Article 16

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.

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