Demand letter Under Bank Guarantee: Key Considerations
A bank guarantee is a financial instrument issued by a bank on behalf of a customer (applicant) to a third party (beneficiary).
A demand, in this context, refers to a formal request from the beneficiary to the issuing bank to make payment under the guarantee.
Key Considerations for a Complying Demand
While there's no single universal standard for a demand, it generally needs to fulfill the following criteria:
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Originality and Authenticity:
- The demand must be an original document, not a copy.
- It must be signed by the authorized representative(s) of the beneficiary.
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Timeliness:
- The demand must be submitted within the validity period specified in the bank guarantee.
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Breach of Contract:
- The demand must clearly and explicitly state the specific breaches committed by the applicant under the underlying contract or agreement. This is crucial to demonstrate that the beneficiary's claim is valid.
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Clear Instructions and Claim Amount:
- The demand must clearly indicate the amount claimed under the guarantee.
- The demand should also indicate a reference to the relevant bank guarantee
- It must provide precise instructions for payment, including the beneficiary's bank account name and number.
Importance of a Complying Demand
Submitting a complying demand is crucial for the beneficiary to successfully claim payment under the bank guarantee. Any deficiencies in the demand may give the issuing bank grounds to refuse payment. Therefore, it's essential for beneficiaries to carefully review and prepare their demands to ensure they meet all the necessary requirements.
Disclaimer: This essay provides general information and should not be considered legal advice. The specific requirements for a complying demand can vary depending on the terms of the individual bank guarantee and applicable laws.
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