n SA Mercantile Law Journal = SA Tydskrif vir Handelsreg - The documentary nature of demand guarantees and the doctrine of strict compliance (part 1)

Volume 21, Issue 3
  • ISSN : 1015-0099
  • E-ISSN: 1996-2185



A 'demand guarantee' is usually a concise and simple instrument issued by a bank (or other financial institution) under which the obligation to pay a beneficiary a fixed or maximum sum of money arises merely upon the making of a demand for payment in the prescribed form and sometimes also the presentation of documents as stipulated in the guarantee within the period of validity of the guarantee. Many demand guarantees are payable on first demand without any additional documents, which reflects their origin in replacing cash deposits, although increasingly guarantees require at least a statement indicating that the principal is in breach. Therefore, a demand guarantee is like a substitute for cash and must be honoured on presentation of a written demand that complies with the provisions of the guarantee.

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