June, 2020 - What type of guarantee is it?

There are two main types of guarantee: “see to it” guarantees, where the guarantor is only liable to pay out if the underlying debtor is found liable to the creditor, and “demand” guarantees, where the guarantor is liable to pay out against the creditor’s demand, irrespective of whether or not the underlying liability is proven. The difference can clearly be crucial for the party seeking to draw down on the guarantee as demonstrated in the recent case of Shanghai Shipyard Co. Ltd. v Reignwood International Investment (Group) Company Ltd [2020] EWHC 803 (Comm).

In this case, the English Commercial Court was asked to consider whether a parent guarantee given to a shipyard in respect of the final instalment payable under a shipbuilding contract was a “see to it” or “demand” guarantee.
 

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