URDG 758 - Article 2-Definitions

Parties involved in a contract must be properly identified. A contract should contain a contractual parties clause defining each party entering into the agreement, in this article we shall look upon the definitions of all the involve parties in a guarantee and counter guarantee.

Definitions 

Advising Party: Means the party that advises the guarantee at the request of the guarantor. 

Sometimes, to expedite the process of advising instead of sending thru courier guarantor choses the SWIFT format and beneficiary may not be listed under SWIFT, wherein advising bank/advisor comes into the picture to advise the guarantee to beneficiary. 

Applicant: Means the party indicated in the guarantee as having its obligation under the underlying relationship supported by the guarantee. The applicant may or may not be the instructing party.

Guarantee is an instrument which backs up non-performance, an applicant is the party who has to perform under the contract and upon whose behalf guarantees are usually issued, an applicant may or may not be the instructing party.

Application: Means the request for the issue of the guarantee.

Authenticated: When applied to an electronic document, means that the party to whom that document is presented is able to verify the apparent identity of the sender and whether the data received have remained complete and unaltered.

It means that the received information/guarantee is genuine and the advising party has verified/checked the authenticity, if a guarantee is in the form of an authenticated SWIFT it deemed to be authenticated.

Beneficiary: Means the party in whose favor a guarantee is issued.

Business Day: Means a day on which the place of business where an act of a kind subject to these rules is to be performed is regularly open for the performance of such an act.

A guarantee usually opened by a bank. However, in theory and rarely it may be opened by any party, business day means a day when the opener of the guarantee is opened to perform the guarantee related business. 

Charges: Mean any commissions, fees, costs or expenses due to any party acting under a guarantee governed by these rules.

Charges are collected by the party on whom it is indicated under the guarantee. However, it is born by the instructing party if unable to collect from the indicated party. For an example if the advising charges are on account of beneficiary and guarantee is terminated without utilization, in that case charges will be borne by the guarantor and sequentially guarantor will charge from instructing party/applicant.

Complying Demand: Means a demand that meets the requirements of a complying presentation. 

A demand as per guarantee terms, URDG and ISDGP.

Complying Presentation: Under a guarantee means a presentation that is in accordance with, first, the terms and conditions of that guarantee, second, these rules so far as consistent with those terms and conditions and, third, in the absence of a relevant provision in the guarantee or these rules, international standard demand guarantee practice.

Usually demand, presentation, call or drawing etc. used to describe the demand or presentations, this should be as per terms of the guarantee, URDG and ISDGP.

Counter-Guarantee: Means any signed undertaking, however named or described, that is given by the counter-guarantor to another party to procure the issue by that other party of a guarantee or another counter-guarantee, and that provides for payment upon the presentation of a complying demand under the counter-guarantee issued in favor of that party.

A guarantee may be based on the counter guarantee. Sometimes, a beneficiary wants a guarantee to be issued by local bank/guarantor to avoid the country risk of original guarantor/applicant. In such a case local guarantees are opened on the basis of counter guarantees, we can co-relate the situation from confirmation of a Letter of Credit, however, guarantees deal with applicable law as well.

Counter- Guarantor: Means the party issuing a counter-guarantee, whether in favor of a guarantor or another counter-guarantor, and includes a party acting for its own account.

The party who issues the counter guarantee. A counter guarantee may be issued in favor of another counter guarantor and there may be a chain (rare scenario) counter guarantor and based on the final counter guarantee a local guarantee may be issued.

 Demand: Means a signed document by the beneficiary demanding payment under a guarantee.

A demand may be made in the form of authenticated swift as well, it auto fulfils the signature requirement without manual signature.

Demand Guarantee or guarantee: Means any signed undertaking, however named or described, providing for payment on presentation of a complying demand. 

Document: Means a signed or unsigned record of information, in paper or in electronic form, that is capable of being reproduced in tangible form by the person to whom it is presented. Under these rules, a document includes a demand and a supporting statement. 

A demand guarantee or counter guarantee are documentary in nature same as Letter of Credit. Documents refer to called documents under the guarantee which can be reproduced or able to print if in authenticated electronic form or signed or unsigned (as per requirement) if in paper form.

Expiry: Means the expiry date or the expiry event or, if both are specified, the earlier of the two.

Expiry date is the fixed date or after three years of issuance in case no expiry date or event indicated under the guarantee, there may be different reason of expiry such as beneficiary release notes, full utilization of the amount etc.

Expiry Date: Means the date specified in the guarantee on or before which a presentation may be made.

Expiry Event: Means an event which under the terms of the guarantee results in its expiry, whether immediately or within a specified time after the event occurs, for which purpose the event is deemed to occur only:

a. when a document specified in the guarantee as indicating the occurrence of the event is presented to the guarantor, or

b. if no such document is specified in the guarantee, when the occurrence of the event becomes determinable from the guarantor's own records. guarantee, see demand guarantee. 

An expiry event is the event upon occurrence of that guarantee will be expired. For example, if the guarantee provides for both an expiry event, being the presentation to the guarantor of a document signed by both the beneficiary and the applicant confirming that the project is complete, and an expiry date of 31 December 2018, the guarantee will expire upon presentation of the relevant document if that occurs before 31 December 2018. If it has not occurred by 31 December 2018, the guarantee will expire on that date.

Guarantor: means the party issuing a guarantee, and includes a party acting for its own account. 

Guarantor's Own Records: Means records of the guarantor showing amounts credited to or debited from accounts held with the guarantor, provided the record of those credits or debits enables the guarantor to identify the guarantee to which they relate.

Instructing Party: Means the party, other than the counter-guarantor, who gives Instructions to issue a guarantee or counter-guarantee and is responsible for Indemnifying the guarantor or, in the case of a counter-guarantee, the counter guarantor. The instructing party may or may not be the applicant.

Presentation: Means the delivery of a document under a guarantee to the guarantor or the document so delivered. It includes a presentation other than for a demand, for example, a presentation for the purpose of triggering the expiry of the guarantee or a variation of its amount. 

An act of presenting the documents with demand or demand alone called presentations.

Presenter: Means a person who makes a presentation as or on behalf of the beneficiary or the applicant, as the case may be. 

Usually a demand/presentations are made on or behalf of the beneficiary, however, there may be situations wherein some documents are called by applicant as well, this will re-route the guarantee purpose and suggested.

Signed: When applied to a document, a guarantee or a counter-guarantee, means that an original of the same is signed by or on behalf of its issuer, whether by an electronic signature that can be authenticated by the party to whom that document, guarantee or counter-guarantee is presented or by handwriting, facsimile signature, perforated signature, stamp, symbol or other mechanical method.

Supporting Statement: Means the statement referred to in either article 15 (a) or article 15 (b). 

Means statement of breach which is a mandatory requirement to be presented by beneficiary while making a demand.

Underlying Relationship: Means the contract, tender conditions or other relationship between the applicant and the beneficiary on which the guarantee is based.