Articles 16 & 17 URDG

Article 16 relates to the obligations of receiver of the demands to notify the counter guarantor and/or instructing party without delay.

Article-16 URDG
Information about demand 

The guarantor shall without delay inform the instructing party or, where applicable, the counter-guarantor of any demand under the guarantee and of any request, as an alternative, to extend the expiry of the guarantee. The counter-guarantor shall without delay inform the instructing party of any demand under the counter-guarantee and of any request, as an alternative, to extend the expiry of the counter-guarantee.

This article relates to the passing of information down in sequence from the guarantor to the counter‑guarantor and to the instructing party without delay that it has received a demand. The guarantor must pass on information about the demand without waiting to check whether the demand is a complying demand. This enables the counter‑guarantor and/or the instructing party to know promptly that a demand has been made.

In case of extend or pay demand, if demand is complex and the guarantor is not confident that it can reach a decision within one or two business days, the safer course is for the guarantor first to give notice to the instructing party or counter‑guarantor without delay, in accordance with article 16, and then to give a separate notice under sub‑article 23 (c) about suspension period, if it subsequently decides to suspend payment.

Article-17 URDG
Partial demand and multiple demands; amount of demands

This article of URDG relates that partial demands and multiple demands may be made under the demand guarantee unless the terms of the demand guarantee expressly exclude that right.

a. A demand may be made for less than the full amount available and is called partial demand. However, in case guarantee states “partial demand prohibited” a demand can only be made for the full amount at once. This may trigger a loss to an applicant and one need to take into the consideration such a clause while issuing the guarantees.

For an example guarantee value USD 10,000.00 and demand presented for value USD 8,000.00 will be a partial demand. If a partial demands prohibited then only a demand of USD 10,000.00 will be a complying demand with other terms of the guarantee.

B. More than one demand is called multiple demands may be made.

C. The expression "multiple demands prohibited" or a similar expression means that only one demand covering all or part of the amount available may be made.

If in above example a demand made for USD 8,000.00 then other demands for remaining amount not allowed and cannot be made.

D. Where the guarantee provides that only one demand may be made, and that demand is rejected, another demand can be made on or before expiry of the guarantee.

If guarantee states multiple demands prohibited and one demand is rejected, another demand can be made on or before expiry, and beneficiary will not be able to present only when a complying demand is honored. Making a demand that is not a complying demand or withdrawing a demand does not waive or otherwise prejudice the right to make another timely demand, whether or not the guarantee prohibits partial or multiple  demands.

E. A demand is a non-complying demand when:

  • It is for more than the amount available under the guarantee.
  • Any supporting statement or other documents required by the guarantee indicate amounts that in total are less than the amount demanded.

However, any supporting statement or other document indicating an amount that is more than the amount demanded does not make the demand a non-complying demand.

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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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