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United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, 1996

Title
United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, 1996
Table of Contents
Content

UNITED NATIONS CONVENTION ON INDEPENDENT GUARANTEES AND STAND-BY LETTERS OF CREDIT

Article 2. Undertaking

(1) For the purposes of this Convention, an undertaking is an independent commitment, known in international practice as an independent guarantee or as a stand-by letter of credit, given by a bank or other institution or person ("guarantor/issuer") to pay to the beneficiary a certain or determinable amount upon simple demand or upon demand accompanied by other docu­ ments, in conformity with the terms and any documentary conditions of the undertaking, indicating, or from which it is to be inferred, that payment is due because of a default in the performance of an obligation, or because of another contingency, or for money borrowed or advanced, or on account of any mature indebtedness undertaken by the principal/applicant or another person.

(2) The undertaking may be given:

(a) At the request or on the instruction of the customer ("principal/ applicant") of the guarantor/issuer;
(b) On the instruction of another bank, institution or person ("in­structing party") that acts at the request of the customer (“principal/applicant”) of that instructing party; or
(c) On behalf of the guarantor/issuer itself.

(3) Payment may be stipulated in the undertaking to be made in any form,

including:

(a)  Payment in a specified currency or unit of account;
(b)  Acceptance of a bill of exchange (draft);
(c)  Payment on a deferred basis;
(d)  Supply of a specified item of value.
(4) The undertaking may stipulate that the guarantor/issuer itself is the beneficiary when acting in favour of another person.


Article 3. Independence of undertaking

For the purposes of this Convention, an undertaking is independent where the guarantor/issuer’s obligation to the beneficiary is not:

(a) Dependent upon the existence or validity of any underlying trans­ action, or upon any other undertaking (including stand-by letters of credit or independent guarantees to which confirmations or counter-guarantees re­late); or

(b) Subject to any term or condition not appearing in the undertaking, or to any future, uncertain act or event except presentation of documents or another such act or event within a guarantor/issuer’s sphere of operations.
Referring Principles
A project of CENTRAL, University of Cologne.