Drafting Demand Guarantees Made Easy
Mastering Demand Guarantees
A Clear Guide to the Content of Instructions & Guarantees under URDG 758
Why Clarity is Your Best Asset
Ever tried building a house without a blueprint? It leads to chaos, delays, and unexpected costs. The same is true for demand guarantees. Vague or poorly drafted instructions are a primary source of disputes in international trade. This guide demystifies the process, ensuring your financial guarantees are clear, precise, and effective.
The Essential Blueprint: URDG 758 Article 8
The ICC's Uniform Rules for Demand Guarantees (URDG 758) provide a recommended checklist. While not mandatory for validity, following these points is the best practice for clear guarantee drafting.
The Applicant
The party whose obligation is being guaranteed.
Example: XYZ Corporation, 123 Business Lane.
The Beneficiary
The party who receives the guarantee and can make a claim.
Example: Global Trade Co., 456 Commerce St.
The Guarantor
The bank or entity issuing the guarantee.
Example: International Bank Plc.
Underlying Relationship
A reference linking the guarantee to the specific contract.
Example: Contract No. ABC-2023.
Amount & Currency
The maximum payable amount.
Example: USD 1,000,000.
Expiry Date/Event
When the guarantee's obligation ends.
Example: 31 December 2024.
The Ultimate Shortcut: "Subject to URDG 758"
This one simple phrase incorporates all 35 articles of the URDG rules into your guarantee.
Why It's a Game-Changer
- Saves Time: No need to draft lengthy clauses on independence, irrevocability, or examination standards.
- Adds Clarity: It's a clear signal that this is an independent demand guarantee, not a suretyship.
- Reduces Risk: Most potential questions are already answered within the URDG rules themselves.
What if Details are Missing?
URDG 758 provides default rules for common omissions, preventing the guarantee from becoming invalid.
No Expiry Date?
The guarantee automatically terminates 3 years from its issue date. URDG Art. 25(c)
No Presentation Form?
Documents can be presented in either paper or electronic form. URDG Art. 14(e)
Visual Guide to Demand Guarantees
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