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Morteza Shahbazinia Assistant Professor of Law, Ministry of Science, Research and Technology  The Condition of payment form the heart of the guarantee. They determine the actual benefits for the beneficiary and the risk exposure for the account party/principal debtor. For example, it is the clause that payment will be made on the beneficiary’s first demandwithout any proof of default that renders this particular guarantee totally different from the traditional or accessory guarantee. On the other, aguarantee payable upon submission of an arbitral or court decision is in substance hardly different from the contract of accessory guarantee. While different as regards the degree of default, all conditions of payment share a common characteristic, namely their documentarynature. All of them require the submission of documents and the bank’s duty is confined to examining whether these documents comply with the documents prescribed in the guarantee. It is this documentary nature of the conditions of payment, which enables the bank to perform its function.

Keywords: Conditions of payment, Documentary nature, First demand, Guarantor/issuing bank, Underlying contract, Bank Guarantee

     

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