(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.
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.