A refund guarantee is an essential component of almost every shipbuilding project, without which the buyer will be unwilling or unable to proceed.
There is no standard form of refund guarantee in universal usage, and both the form and substance of refund guarantee instruments vary widely from case to case. The ambiguity or uncertainty of the meaning of refund guarantee instruments, against a backdrop of a sharp downturn in the shipping markets, has led to numerous disputes in recent years concerning refund guarantees, which have been the subject of a number of important decisions of the English Courts.
This is the first English law text book dedicated to the subject of refund guarantees. It provides essential guidance as to the issues arising and the pitfalls to be avoided. It analyses the specimen form of guarantee annexed to Bimco’s NEWBUILDCON form, and covers topics such as the circumstances in which the liability of the guarantor may be discharged, and when a builder may be entitled to obtain an injunction to restrain payment under a refund guarantee.
It will be an essential and practical guide for those engaged in the shipbuilding industry, including shipbuilders, shipowners, banks and insurance companies, P&I clubs, and those advising them.
Table of Contents
- Definitions and characteristics
- Contractual and statutory requirements
- Aids to construction of demand instruments and guarantees
- Presumption against the imposition of primary liability
- Authority of signatory
- Local approvals
- The BIMCO NEWBUILDCON – Standard Newbuilding Contract – Part II, Annex A (iii) Refund Guarantee
- Clause 1 Definitions
- Clause 2 Guarantor’s Obligation
- Clause 3 Indulgence, delay, amendment or variation
- Clause 4 Duration
- Clause 5 Dispute
- Clause 6 No counterclaim or set-off
- Clause 7 Currency
- Clause 8 Assignment
- Clause 9 Governing law and jurisdiction
- Clause 10 Notices
- Clause 11 Immunity
- Clause 12 - 14 Approvals and authorisations
- Guarantees issued on behalf of the buyer
- Guarantees issued on behalf of the builder
- Parent guarantees and letters of comfort
- Assignment and novation
- Material variation of the underlying contract
- Anti-discharge provisions
- Discharge of the surety
- Vitiating elements in the contract of suretyship
- Making demand
- Restraining payment
- Enforceability of an English Court judgment / London arbitration award
Mark Davis is the author of Bareboat Charters, and has over 25 years’ experience as a solicitor in private practice specialising in shipping law.