Mitigating the Risk of Unfair Calling on Demand Guarantees in the Sri Lankan Market

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Author(s)
Rodrigo, Thanuja
Griffith University Author(s)
Year published
2011
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This paper argues that the inherent characteristic of demand guarantees coupled with the issuer's obligation to honour the beneficiary when demanded, creates the potential for unfair calls under demand guarantees which is a rather important risk for the applicant. An examination of the Sri Lankan common law position reveals the limited scope for judicial intervention in restraining unfair calls under demand guarantees. The objective of this paper is to present two strategies for mitigating the risk of unfair calling whilst retaining the on-demand character of the guarantee: (I) The issue of the guarantee subject to the latest ...
View more >This paper argues that the inherent characteristic of demand guarantees coupled with the issuer's obligation to honour the beneficiary when demanded, creates the potential for unfair calls under demand guarantees which is a rather important risk for the applicant. An examination of the Sri Lankan common law position reveals the limited scope for judicial intervention in restraining unfair calls under demand guarantees. The objective of this paper is to present two strategies for mitigating the risk of unfair calling whilst retaining the on-demand character of the guarantee: (I) The issue of the guarantee subject to the latest Revision of the International Chamber of Commerce's Uniform Rules for Demand Guarantees (commonly referred to as URDG, Revision 758) which requires the beneficiary to submit a statement of breach along with the demand for payment. (II) The incorporation of a fast-track 'Adjudication' clause within the guarantee itself, which requires the beneficiary to submit his claim to an adjudicator prior to making the demand for payment.
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View more >This paper argues that the inherent characteristic of demand guarantees coupled with the issuer's obligation to honour the beneficiary when demanded, creates the potential for unfair calls under demand guarantees which is a rather important risk for the applicant. An examination of the Sri Lankan common law position reveals the limited scope for judicial intervention in restraining unfair calls under demand guarantees. The objective of this paper is to present two strategies for mitigating the risk of unfair calling whilst retaining the on-demand character of the guarantee: (I) The issue of the guarantee subject to the latest Revision of the International Chamber of Commerce's Uniform Rules for Demand Guarantees (commonly referred to as URDG, Revision 758) which requires the beneficiary to submit a statement of breach along with the demand for payment. (II) The incorporation of a fast-track 'Adjudication' clause within the guarantee itself, which requires the beneficiary to submit his claim to an adjudicator prior to making the demand for payment.
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Journal Title
Macquarie Journal of Business Law
Volume
8
Copyright Statement
© The Author(s) 2011. The attached file is reproduced here in accordance with the copyright policy of the publisher. For information about this journal please refer to the journal’s website or contact the author.
Subject
Commercial and Contract Law
Law