Article-15 URDG-758

Demand Requirements means the order of and procedures related to the making of a demand, this article provide some basic and mandatory requirements while making the demands to secure the interests of applicant and beneficiary.

Article-15 URDG-758
Requirements for demand

A. A demand under the guarantee shall be supported by other documents as well specified in the guarantee, and in any event by a statement, by the beneficiary, indicating in what respect the applicant is in breach of its obligations under the underlying relationship. This statement may be in the demand or in a separate signed document accompanying or identifying the demand.

There is a requirement for a statement of breach with demand, whether or not expressly required by the terms of the guarantee, any demand must be supported by a statement by the beneficiary indicating in what respect the applicant is in breach of its obligations under the underlying relationship.

This creates a balance between the interests of the beneficiary and applicant, while preserving the independent status of the demand guarantee. The beneficiary will prefer to make a demand without having to prove that the applicant is in default, but the applicant does not want the beneficiary to make a demand without identifying default. If the applicant is seeking a court injunction or if there is a subsequent dispute between the applicant and the beneficiary over the beneficiary’s right to make a demand, the statement of default will be the main document to prove.

B. A demand under the counter-guarantee shall in any event be supported by a statement, by the party to whom the counter-guarantee was issued, indicating that such party has received a complying demand under the guarantee or counter guarantee issued by that party. This statement may be in the demand or in a separate signed document accompanying or identifying the demand.

Presentation under a counter‑guarantee subject to URDG-758 are the same as a demand guarantee. However, there is one exception. While making a demand under a counter‑guarantee, the local guarantor is not required to provide a statement of breach by the applicant of its obligations under the underlying relationship, because there is no underlying relationship between the applicant and the guarantor. However, demand must be supported by a statement that the guarantor has received a complying demand under the guarantee it has issued.

C. The requirement for a supporting statement in paragraph (a) or (b) of this article applies except to the extent the guarantee or counter-guarantee expressly excludes this requirement. Exclusion terms satisfy the requirement and will not be implemented.

Requirement for presenting the statement of breach as per sub-article “a” and “b” can be excluded by the express text of guarantee. However, We need to take care when while doing such an exclusion that guarantee provides a clear statement to the obligations of each party. Exclusion may lead to honor of a demand without a beneficiary certifications that applicant in breach.

D. Neither the demand nor the supporting statement may be dated before the date when the beneficiary is entitled to present a demand. Any other document may be dated before that date. Neither the demand, nor the supporting statement, nor any other document may be dated later than the date of its presentation.

A demand or supporting statement cannot be dated before the date when beneficiary is entitled to claim. However, any other document can be dated before that date.

For an example if a payment guarantee states that “demand can only be made after dated 10-Oct-2020. In this case demand and supporting statement will only be presented and dated after stated date but any other document such as unpaid invoice may be dated before the 10-10-2020.

No document or demand can be dated after the date of presentations (future dates) which is logically wrong. For an example if a demand presented on dated 11-Oct-2020 then no document must be dated after 11-Oct-2020.

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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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