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Surety guarantee or demand guarantee?

Building Law Monthly

Surety guarantee or demand guarantee?

In Shanghai Shipyard Co Ltd v Reignwood International Investment (Group) Co Ltd [2021] EWCA Civ 1147, the Court of Appeal held that the undertaking given by the defendant was a demand guarantee and not a surety guarantee. In so concluding the Court of Appeal held that, when seeking to determine into which category an undertaking falls, the focus of the court should be upon the words used in the document that the court is called upon to interpret and that these words should be interpreted in accordance with the normal principles applicable to the interpretation of commercial contracts. In particular, there is no longer any room for a presumption that an undertaking given by an institution which is neither a bank nor a financial institution is a surety guarantee.

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