Article-11-URDG-758

This Article of URDG-758 is almost similar to article-10 of UCP-600 rules for documentary credit. People who have already handled the commercial letter of credit can easily co-relate.

Amendments

A-When guarantor receives the instruction to issue an amendment to the guarantee, if the guarantor for whatever reason is not prepared or is unable to issue that amendment, the guarantor shall without delay so inform the party that gave the guarantor its instructions.

A guarantor is under no obligation to accept instructions to issue an amendment unless it has previously agreed to do so. There may be various reasons that guarantor is not in a position to issue the amendment to the guarantee such as exposure expired, not sufficient limits or bank regulatory guidelines, In these situations guarantor should inform the applicant or instructing party as the case may be that they will not be able to issue the amendment.

B- An amendment made without beneficiary’s agreement is not binding on the beneficiary. Nevertheless, the guarantor is irrevocably bound by an amendment from the time it issues the amendment, unless and until the beneficiary rejects that amendment.

Once an amendment is issued guarantor is irrevocably bound. However, beneficiary may reject or accept the amendment, it is a best practice if they provide the written consent to that effect either for acceptance or rejections. In most of the cases a beneficiary does not provide the consent and acceptance or rejection are determined by the presentation of demands. If in case the beneficiary rejects the amendment, the guarantor ceases to be bound by it.

C- Except where made in accordance with the terms of the guarantee, the beneficiary may reject an amendment of the guarantee at any time until it notifies its acceptance of the amendment or makes a presentation that complies only with the guarantee as amended.

A beneficiary may accept or reject the amendment by communicating that acceptance or rejection to the advising bank or directly to the guarantor. As indicated in sub article “b” above that a beneficiary is not bound to provide written consent for acceptance or rejection and this may be determined though the presentation of demand. These kind of amendments are called detrimental amendments. Nevertheless, if in case there is an automatic amendment clause given in the guarantee, that will make beneficiary to deemed to accepted or rejected as per terms of the guarantee.

D- An advising party need to inform without delay to party from which it has received the amendment of the beneficiary’s notification of acceptance or rejection of that amendment.

If the beneficiary’s acceptance or rejection of the amendment is notified to the advising party, the advising party must without delay inform the guarantor or the other advising party of such acceptance or rejection. 

E- Partial acceptance of an amendment is not allowed and will be deemed to be notification of rejection of the amendment.

Partial acceptance of an amendment is considered as rejection of the amendment. For an example original guarantee value increases from 100K USD to 110K USD and expiry date of the guarantee decreases from 01-01-2020 to 07-01-2019, Beneficiary has accepted the increase of amount where in expiry date correction was not accepted. This will deemed to be a rejection.

F- A provision in an amendment to the effect that the amendment shall take effect unless rejected within a certain time shall be disregarded.

If an amendment contains a clause such as “This amendment will deemed to be accepted if no written consent of rejection or acceptance received till 01-01-2020” will be disregarded.

Note: In some of the case particular terms relating to anticipated amendments can be set out in the demand guarantee itself. Such terms often relate to a variation of the amount of the guarantee in the form of index or guarantee clauses.

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Chandan Kumar Yadav
My name is Chandan Kumar Yadav CDCS, CSDG, CITF, PGDIBO,AML-KYC, CCFE, MLIBF, CSF, 6SIGMA a trade finance professional with an experience of 11 years whereas worked with several stages of letter of credit, bank guarantee and on other payments methods of trade transactions such as documentary collection, open accounts, SBLC etc., I have a fair understanding of Trade Based Money Laundering as well, Blogging related to Trade Finance is my passion and I want to share which I know and learn from others, I have worked with Wells Fargo, Yes Bank Limited and Bank of America, India which helped me to gain knowledge, view of Trade Finance and importance of International Trade in world's economy. Trade Finance is thumping product, everyday we are learning something new so in order to keep learning I started this as one of the platform. . Let's Learn Together

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