Guarantees in Maltese law and international banking

Abstract

The thesis examines the demand guarantee as an instrument which provides security for the payment of a sum of money in the case of non-fulfillment of obligations; obligations which emanate from an underlying transaction and which are usually non-monetary in nature. Chapter 1 sets the scenario by providing background information explaining the context of use and the content of the rights and obligations emanating therefrom. Chapter 2 introduces international rules of practice as well as the UN Convention dealing with the instrument. The significant features thereof are outlined at this stage however one finds scattered more detailed analysis at various stages of the thesis wherever the need arises. Chapter 3 examines the legal nature of the demand guarantee. The instrument is examined in isolation as well as in contrast with the documentary letter of credit. The reasons are two-fold. First of all, the two instruments occur very frequently together in the context of international trade transactions. Secondly, notwithstanding the different functions thereof both instruments give rise to an obligation which is documentary in nature. Chapter 4 examines the precise significance and the practical application of the principle of autonomy of the guarantee from the underlying transaction; a principle which constitutes the foundation of the issues to be tackled at a later stage. Chapter 5 deals with the issue of injunctions prohibiting a demand from being made and/or payment from being effected. The issue is tackled in the light of the documentary nature of the obligation and the autonomous character thereof. Chapter 6 deals with fraud as an exception to the principle of autonomy. The subject is tackled by examining the approach taken by the English courts, following which is an analysis of the continental approach as well as the conscious departure of the Singaporean courts from the strict stand taken by the English courts. Chapter 7 examines the period of validity and the significance thereof. It also tackles practical problems emerging from the non-enforceability of the expiry date in certain legal systems as well as those emerging from the requirement of the return of the document. The latter issue is discussed in the light of the status of the guarantee document itself.