what is assignment clause in bank guarantee

Assignment Clause

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Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

Example 1 . A business closing or a change of control occurs
Example 2 . New services providers taking over existing customer contracts
Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival . Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database, EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database, EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database, EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database, EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

Real estate contracts
Sales contract
Asset purchase agreement
Purchase and sale agreement
Bill of sale
Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Assignment of bank guarantee for bank finance

Nitin Agrawal (Chartered Accountant) (317 Points)

This is a question related to finance on which clarity is needed.

- Suppose there is large size contractor (X Ltd) who has got a work order for construction of govt building and also for execution of electrical commissioning in said building.

- Said contractor company (X Ltd) need to buy various electrical items from open market for execution of the project. Lets assume said company has made tie up with one supplier (Y Ltd) for supply of all electrical items. Y Ltd will also provide the after sales services for 2 years to main contractor X Ltd

- Due to large size order and shortage of working capital Y Ltd needs working capital assistance. However to get that assistance from its bank, Y ltd does not have sufficient security. Also in such huge project Y Ltd wants to involve X ltd financially either by way of advance or by way of financial security.

- X Ltd is having bank guarantee limits with various banks in sizable amount.

- X Ltd agrees to give a bank guarantee in favor of banker of Y Ltd against which Y Ltd can avail working capital from its banker. Said bank guarantee will have assignment clause in favor of banker of Y ltd and also would be invocation at the open of banker of Y ltd at the incident of default by Y Ltd in repayment of debt of working capital.

- Question is 1) Whether RBI permits assignment of Bank Guarantee's in such way for raising funds? 2) Whether said kind of practice is prevailing in market with any bank? 3) Whether said BGs would be enforceable by lender at the time of default?

Kindly suggest.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (162049 Points) --> Replied 24 June 2023

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assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Why Use Bank Guarantees in Long-Term Project Contracts?

Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas' experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

When it comes to managing the risk and safety of long-term projects, a bank guarantee promises that if the company carrying out the project defaults on any of its loans, the bank will cover the costs or losses. This guarantee work clause increases the confidence of the vendors who need to give large amounts of their products or services, usually on credit, to complete their part of the project.

Key Takeaways

In a long-term project, vendors usually have to make a significant outlay of either materials or money (usually on credit) before getting paid for the completion of a project.
Bank guarantees are extended by banks in long-term projects to provide vendors with comfort if the project management company defaults or closes operations before the vendor is paid.
A bank guarantee is a promissory provision on a loan indicating that if the borrower of the loan defaults on repayment, the bank will cover the amount of default.
Bank guarantees make it possible for a project to move to the next stage, allowing multiple companies to work together to complete a large-scale project.

The Importance of Bank Guarantees

A bank guarantee is essentially a promissory provision on a loan indicating that if the borrower of the loan defaults on repayment, the bank will cover the amount of default. This is a crucial provision to convince multiple companies to work together to complete a long-term project.

This guarantee work clause can be essential for allowing a project or venture to move to the next stage. With the backing of the bank, all parties are covered in the worst-case scenario, if payments do not come through.

Financial Bank Guarantee

There are a variety of bank guarantees that can be taken out for various circumstances. The bank guarantee that makes the most sense for vendors for long-term projects is a financial bank guarantee.

A financial bank guarantee ensures that the vendor will be paid if the company managing the project that hired the vendor is not able to do so. In this scenario, the bank will cover the financial burden. Exactly what is covered in the guarantee will depend on what is agreed upon by the vendor and the project management company.

The amount of the bank guarantee can be included in the bid that a vendor provides to a project management company.

This can include covering the cost of the materials already bought, work already performed, and possibly the entire cost that the vendor was hired for because it could not take on other jobs due to contracting with this specific job. The more money in the guarantee the more of a fee the project management company will have to pay for it.

Example of a Bank Guarantee

For example, if a construction company takes on the long-term project of building an office tower, that company needs to hire vendors and subcontractors to complete the project. In this example, the construction company that's overseeing the project could specialize in framing the office building, but it needs to subcontract with another company to install the thousands of window panes needed to complete the project.

The construction company might not be paid for its work until the end of the project. It needs to hire the window installation company on credit through a loan since the thousands of window panes could cost more than a million dollars. This puts a lot of risk on the window installation company. The project could take longer than anticipated, or it could be scrapped due to a lack of funding from the group paying for the construction of the office building.

Having a bank guarantee in place reduces the risk to the window installation company because it knows that, no matter what happens, it will receive payment.

What Are the Types of Bank Guarantees?

There are different types of bank guarantees for different purposes. The most common types of bank guarantees are financial bank guarantees, performance bank guarantees, advance or deferred payment bank guarantees, and bid-bond bank guarantees.

What Is the Advantage of a Bank Guarantee?

The primary advantage of a bank guarantee is the reduction of financial risk . A vendor can feel comfortable in growing its business and taking on a project, which is usually done via credit (taking out loans) with the knowledge that if the company that hired them can't make payment, the bank guarantee will cover any liabilities.

What Is the Risk of a Bank Guarantee?

There is zero risk of a bank guarantee. The total risk of a bank guarantee lies with the bank that issued the guarantee. If a bank guarantee is exercised, the beneficiary receives payment and the payment comes from the bank. The applicant of the bank guarantee does have to pay a fee for having a bank guarantee issued, but otherwise is not liable for any costs.

The Bottom Line

Long-term projects, such as construction projects, are large in scale and costly. Companies can float bonds and secure bank guarantees to ensure the project's financial viability. They require many vendors to work together to complete a specific goal. Projects can run out of money, go over budget, or shut unexpectedly, possibly leaving vendors out of money if they've already begun work.

Bank guarantees provide comfort to vendors for any foreseeable financial loss and allow projects to move forward to completion.

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Bank Guarantees: Judicial Interpretation and Recent Developments

Post author: LawFoyer
Post published: 5 June 2021
Post category: Articles
Post comments: 0 Comments
Reading time: 14 mins read

By:- Janvi Vishnani

Introduction

With globalization there is an expansion in both international and local commerce, there is a demand for a trusted source to safeguard and decrease risks in commercial transactions. In today’s business environment, where business transactions are conducted globally and parties are geographically separated, an innovative concept is required to fulfill the original purpose of guarantee, which is to provide security in payments for our claims. Thus, the concept of bank guarantee was developed. For both local and foreign trade, bank guarantees are regarded as “life-blood.”

Meaning: Bank Guarantee

A Bank guarantee is a separate contract between the beneficiary and the bank. It is a contract in which the bank agrees to return the amount of the debtor default and release the debtor from all its liabilities. The bank acts as a guarantor in this scenario, assures that the debtor’s loan will be repaid. Bank guarantees are contracts that are separate from and unrelated to each other. It has nothing to do with the major debtor’s or creditor’s relationship.

Section 126 of the Indian contract act 1872 describes the ‘Contract of guarantee’, which states that is an agreement to fulfil a third party’s commitment or relieve his liability if he fails to do so. The ‘surety’ is the person who gives the guarantee; the ‘principal debtor’ is the person in whose default the guarantee is given, and the ‘creditor’ is the person to whom the guarantee is given. Here in this case surety is Bank.

These banks are professional guarantors who provide a financial service in return for a fee by providing bank guarantees. The fundamental goal of implementing bank guarantees is to promote free commerce by protecting creditors from losses and assisting them in reclaiming debts in the event of a loss. The financial risk associated with a commercial transaction gets reduced when the bank gives a guarantee.

It promotes the seller/beneficiaries to build their business on a credit basis because of the minimal risk. Guarantees are usually charged at a cheap rate by banks, which is advantageous to even small businesses. When banks examine and verify a company’s financial viability, it gains credibility, which leads to more commercial prospects. The guarantee usually needs less paperwork and is handled swiftly by banks (if all the documents are submitted).

Types of Bank Guarantees

There are two types of guarantees, which are as follows: –

Conditional Guarantee: – In this instance, the bank will only pay the money if the debtor complies with specific requirements that may be spelled out in the guarantee contract. A specific requirement such as Proof of default, third-party consent, and so forth. The contract’s criteria must be met to initiate the bank guarantee’s encashment.
Unconditional Guarantee: – Unconditional bank guarantee payment to the beneficiary “unconditionally and irreversibly” on the beneficiary’s first demand once the guarantee is invoked. In this instance, the bank is required to pay the money as soon as the bank guarantee is invoked. In contrast to a conditional bank guarantee, the bank agrees to pay the guarantee regardless of the terms, making the demand to invoke decisive and binding.

Invocation of Bank Guarantee

The recipient must use the Bank Guarantee on or before the guarantee’s expiration date. If the Bank does not receive a claim within the specified validity time, the Bank is released from the obligation. The beneficiary must write a letter to the Bank explaining the circumstances that led to the guarantee being encashed. On the other hand, the party on whose behalf the guarantee was written enjoin the recipient from cashing it? A slew of decisions has been issued specifically for this purpose, which is briefly detailed here.

Unconditional Guarantee: –

Unconditional bank guarantee usually reveals that the guarantor agrees to pay without objection, rendering the demand definitive and enforceable.

The Bank agreed in U.P. Co-op. Federation Ltd. v. Singh Consultants and Engineers (P) Ltd to repay the amount on “first demand” and “without contestation, and without reference to such party and without questioning the legal relationship between the party in whose favor guarantee was given and the party on whose behalf guarantee was given” Regardless of any dispute between the parties, the Hon’ble Supreme Court determined that the Bank was required to pay once demand was made without objection.

In such a circumstance, the person on whose behalf the guarantee was granted was not entitled to an injunction preventing the bank from performing its guarantee.

The court took the case of Sztejn versus J. Henry Schroder Banking Corp , as a precedent, in which the beneficiary faked some documents and made a false representation concerning the commodities sent in, which claimants said were “worthless/rubbish.” The claimant applied for an injunction against the bank guarantee. The highest court ruled that the beneficiary had committed fraud and that an injunction should be issued to prevent the bank guarantee from being issued and payment made.

Given the strictness of the rule, there are two exceptions to the injunction against the invocation of an unconditional bank guarantee: –

Fraud: – The Supreme Court in Reliance Salt Ltd. v. Cosmos Enterprises held that commission of fraud would include any act committed by a party to deceive another party or his agent or to induce him to enter into a contract, referring to the definition of “Fraud” as provided under Section 17 of the Contract Act, 1872. And the person making the accusation who bears the burden of proof.

The Supreme Court stated in U.P. State Sugar Corporation v. Sumac International Ltd. that a fraud involving an unconditional bank guarantee should “vitiates the fundamental foundation of such a bank guarantee.” No other type of fraud will pass the test, and the Bank must be notified of any such fraud. The Hon’ble Supreme Court found that, because the bank commits its credit, which involves its reputation, it had no justification for refusing the payment unless it was fraudulent. The Supreme Court further stated that fraud must be of such an “egregious kind” that it “vitiates the entire underlying transaction.” Furthermore, the beneficiary must be the perpetrator of the deception, and no third parties may be involved.

Even in the case of Hindustan Steelworks Construction Ltd. v. Tarapore & Co , the Hon’ble Supreme Court stated that the exception of fraud must have the effect of vitiating the entire underlying transaction, citing the judgment in U.P. Co-op. Federation Ltd. (Supra). The Supreme Court also held that the fraud must be of such an egregious nature that it would vitiate the entire underlying transaction or the very foundation of such a bank guarantee, whether committed at the time of contract execution or as a result of circumstances or events that occurred afterwards.

Special Equities – irretrievable injustice: – The phrase “special equities” refers to encompassing notion that allows for injunctions against the encashment of bank guarantees only under exceptional situations. In the case of Texmaco Ltd. versus State Bank of India , the Calcutta high court invented the word. The supreme court accepted the idea of exceptional equities as an exemption to injunctions against bank guarantees in the case of Ansal engineering Projects Ltd. versus Tehri Hydro Development Corporation. The notion of unique equities is viewed as a means of offering redress to parties who have been harmed under unusual situations.

In the case of Dwarikesh Sugar Industries Ltd. vs. Prem Heavy Engineering Works (P) Ltd. & Others ., this concept was defined. The court noted that injunctions should only be granted where there is no chance of recovery and contract fulfillment is frustrated or impossible.

Conditional Guarantee: –

In the event of a conditional bank guarantee, the beneficiary does not have an unrestricted right to invoke the guarantee, and the court can impose an injunction against it based on the facts of the case. When a bank guarantee is conditional, the invocation of the guarantee must be done in exact accordance with the terms of the guarantee.

The bank guarantee in dispute in Hindustan Construction Co. Ltd. v. State of Bihar and Ors , developed the phrase “accept absolutely and irreversibly” to guarantee payment to the beneficiary on his first demand without any protest. However, the abovementioned term was immediately qualified by a clause that related to the parties’ original contract. The clause stated that if the person on whose behalf the BG was issued failed to meet specific contract duties, the beneficiary would have the right to collect the entire or part of the guarantee.

Judicial intervention

Corona Virus (COVID – 19), the virus which shattered the whole economy. The unimagined virus took up various businesses, employment. All the activities come to standstill. Many contracts were put on hold, However, the Indian government declared the covid situation as “Force Majeure”. The declaration of covid as a force majeure had an impact on bank guarantees as well. However various courts refused to grant injunctions, solely due to pandemics.

In the case of Haliburton Offshore Services vs. Vedanta Ltd. , the petitioner entered into a contract with Vedanta Ltd. for the installation of infrastructure, including oil wells. The work was on the verge of completion but suddenly the nationwide lockdown was imposed, as there was a total shutdown of all industrial activity, the petitioner failed to meet his contractual duties, and the project was not completed within the agreed time frame.

The Delhi High Court decided in favor of the petitioner and issued an order prohibiting the bank guarantees. The court determined that the petitioner’s failure to fulfill their contractual commitments was solely due to the statewide lockdown imposed by the COVID-19 outbreak, which was prima facie evidence of force majeure. The case of Standard Chartered Bank Heavy Limited versus Heavy Engineering Corporation Limited was used as a precedent.

The court also held that the mere existence of the covid- 19 and statewide lockdown would not excuse every violation or non-performance of the contracts. The parties’ actions before lockdown will be evaluated in terms of their contract performance, and the court will then decide whether or not to award an injunction. In the matter of Standard Retail Pvt. Ltd against M/S G.S. Global Corp. and Others , the petitioners claimed that due to lockdown and COVID-19, they were unable to fulfill their contractual commitments, but the opposing party, domiciled in South Korea, was able to do so.

Thus, the petitioners filed a petition for restraining the respondents and granted an injunction against enforcing the bank guarantees under section 9 of the arbitration and conciliation act of 1996 . The Bombay High Court rejected the petitioner’s position, determined that Covid-19 and subsequent Lockdown would not be considered force majeure in this situation because, to invoke the force majeure clause and to seek injunctions under specific equities, the contract must be completely impossible to fulfill.

First, the paper outlines the idea of a bank guarantee in line with the relevant statutory conditions. A bank guarantee is an assurance given by the bank that if the debtor or creditor fails, the bank would compensate the party that has suffered a loss, as we’ve discussed. Bank guarantee plays an important function in the business sector and aids in the efficient growth of national and international commerce. It should be unconditional to be easily claimed. This notion was established to avoid the parties from having to go through a lengthy judicial process to get their money back.

A bank guarantee is tripartite contracts: -one with the bank, one with the creditor, and one with the debtor. The courts should not be involved in enforcing or invoking a bank guarantee, but in rare cases, such as fraud, the courts must intervene to safeguard the parties’ interests. The parties must be free to carry out their obligations following the contract’s provisions, with little judicial intervention. As we all know, the banking system is the backbone of the economy, and if bank guarantees cannot be encashed by the parties themselves without court intervention, the bank guarantee system as a whole will fail, and people will lose trust in it over time.

Janvi Vishnani is a first-year law student at Narsee Monjee Institute of Management Studies (NMIMS) Navi Mumbai campus, currently pursuing BA.LL. B (Hons).

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Guarantee clause samples

Each of RenaissanceRe Finance and RRNAH may offer and sell from time to time senior, subordinated or junior subordinated debt securities, which we will guarantee . The Capital Trust may offer and sell from time to time preferred securities, which we will guarantee .

08/03/2017 (RENAISSANCERE HOLDINGS LTD)

The following summary sets forth the material terms and provisions of the preferred securities guarantee . Because the following summary of certain provisions of the preferred securities guarantee s is not complete, you should refer to the form of preferred securities guarantee and the Trust Indenture Act for more complete information regarding the provisions of the preferred securities guarantee , including the definitions of some of the terms used below. The form of the preferred securities guarantee has been filed as an exhibit to the registration statement of which this prospectus forms a part and is incorporated by reference in this summary. Whenever we refer to particular sections or defined terms of a preferred securities guarantee , such sections or defined terms are incorporated herein by reference. Reference in this summary to preferred securities means the Capital Trust’s preferred securities to which a preferred securities guarantee relates. The Guarantee Trustee will hold the preferred securities guarantee for the benefit of the holders of the Capital Trust’s preferred securities.

Table of Contents • The obligations of the Capital Trust under the preferred securities will be fully and unconditionally guarantee d by us. See “Description of the Trust Preferred Securities Guarantee .” The Capital Trust is not currently subject to the information reporting requirements of the Exchange Act and it is anticipated that it will not become subject to those requirements upon the effectiveness of the registration statement of which this prospectus is a part.

The Guarantor hereby waives the benefits of diligence, presentment, demand for payment, any requirement that the Trustee or the Holder of such Security exhaust any right or take any action against the Company or any other Person, the filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to such Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guarantee will not be discharged in respect of such Security except by complete performance of the payment obligations contained in such Security and in this Guarantee . This Guarantee shall constitute a guaranty of payment and not of collection. The Guarantor hereby agrees that, in the event of a default in payment of principal, or premium, if any, or interest, if any, on such Security, whether on the Stated Maturity Date, by declaration of acceleration, call for redemption, or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Security, subject to the terms and conditions set forth in the Indenture, directly against the Guarantor to enforce this Guarantee without first proceeding against the Company.

07/02/2018 (NEXTERA ENERGY INC)

SECTION 2.01 Guarantee . The Guarantor hereby fully and unconditionally guarantee s to each Holder the due and punctual payment of the Guarantee Payments, as and to the extent applicable (without duplication of amounts theretofore paid by the Issuer) when and as the same shall become due and payable, according to the terms of the Preferred Stock as set forth in the Articles of Amendment, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. In case of the failure of the Issuer or any successor thereto punctually to pay any such Guarantee Payments, as and to the extent applicable, the Guarantor hereby agrees to cause any such payment to be made punctually when and as the same shall become due and payable, as if such payment were made by the Issuer. The Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to or for the benefit of the Holders or by payment by the Issuer of such amounts to or for the benefit of the Holders.

SECTION 2.04Enforcement of Guarantee . Any Holder of Preferred Stock may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Issuer or any other Person.

SECTION 2.09Form of Guarantee . The Guarantee to be endorsed upon any stock certificate representing Preferred Stock shall be in substantially the form set forth in Exhibit A attached hereto, with such appropriate insertions, omissions, substitutions, and other variations as are required or permitted hereby, and may include such letters, numbers or other marks of identification and legends as may be required to comply with the rules of any securities exchange. The definitive Guarantee to be endorsed upon the Preferred Stock shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner provided that such manner is permitted by the rules of any securities exchange on which the Preferred Stock may be listed. In the alternative, each stock certificate representing Preferred Stock may omit the form of Guarantee set forth in Exhibit A if a legend is included on such stock certificate indicating that a copy of this Guarantee Agreement will be provided upon request.

1. Limited Guarantee . Subject at all times to the terms and conditions set forth in this Limited Guarantee , the Guarantor absolutely and irrevocably guarantee s to the Guarantee d Party the due and punctual performance and discharge of any payment obligations of Parent of 10% (such percentage, the Guarantor’s “Contribution Percentage”) of the aggregate amount of: (a)the Parent Termination Fee if and when due and payable pursuant to Section6.06(c)of the Merger Agreement; (b)the payment obligations of Parent if and when due and payable pursuant to the last two sentences of Section6.15(c)of the Merger Agreement; and (c)the payment obligations of Parent if and when due and payable pursuant to Section6.06(d)of the Merger Agreement (clauses (a)through (c), collectively, the “ Guarantee d Obligations”). Notwithstanding anything to the contrary contained in this Limited Guarantee , in no event shall the maximum aggregate liability of the Guarantor in respect of the Guarantee d Obligations exceed $5,060,191. The Guarantee d Party acknowledges and agrees that the Guarantor (or any of its successors or assignees) shall in no event be required to pay more than $5,060,191 (such limitation on the aggregate liability of the Guarantor for its Guarantee d Obligations being referred to in this Limited Guarantee as the “Cap”). This Limited Guarantee may not be enforced without giving effect to the Cap. The Guarantor shall not be required to pay any amount under this Limited Guarantee if it has funded in full its commitment under its Equity Funding Letter being delivered on the date of this Limited Guarantee (as such amount may be reduced or amended pursuant to such Equity Funding Letter) and the Closing has occurred.

03/06/2020 (CINCINNATI BELL INC)

The Guarantee d Party agrees that in no event shall the Guarantor be required to pay to the Guarantee d Party any amounts in connection with this Limited Guarantee or the Merger Agreement other than as expressly set forth in this Limited Guarantee . All payments under this Limited Guarantee shall be made in lawful money of the United States, in immediately available funds.

2. Other Guarantor. Except in accordance with the immediately following sentence, no claim(s)may be brought against (and no recovery as a result of such claim(s)may be obtained from) the Guarantor under this Limited Guarantee unless such claim(s)have been concurrently brought against the Other Guarantors in connection with the Limited Guarantee s, dated as of the date of this Limited Guarantee (the “Other Limited Guarantee s”), by MIP V (FCC) AIV, L.P. and ASOF Holdings I, L.P. (together, the “Other Guarantors”) in favor of the Company. The immediately preceding sentence shall not apply to the extent that: (i)the bringing of such claim(s)against the Other Guarantors is prohibited or stayed by any applicable Law; or (ii)each Other Guarantor has satisfied in full its obligation under the Other Limited Guarantee . The Company shall not release the Other Guarantors from any obligations under the Other Limited Guarantee s or amend or waive any provision of the Other Limited Guarantee s, except to the extent the Company offers to release the Guarantor under this Limited Guarantee in the same proportion or to amend or waive the provisions of this Limited Guarantee in the same manner. Notwithstanding anything to the contrary contained in this Limited Guarantee or any other document, the obligations of the Guarantor under this Limited Guarantee and of the Other Guarantors under the Other Limited Guarantee s shall be several and not joint.

(a) The Guarantee d Party shall not be obligated to file any claim relating to any Guarantee d Obligation in the event that Parent becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Guarantee d Party to so file shall not affect the Guarantor’s obligations under this Limited Guarantee . In the event that any payment to the Guarantee d Party in respect of any Guarantee d Obligation is rescinded or must otherwise be returned to the Guarantor for any reason whatsoever (other than in connection with the valid termination of the Guarantor’s obligations in accordance with Section7 of this Limited Guarantee or in other circumstances where the Guarantor is not liable to make such payment), to the extent such amount is actually returned to the Guarantor, the Guarantor shall remain fully liable under this Limited Guarantee with respect to such Guarantee d Obligation as if such payment to the Guarantee d Party had not been made. This Limited Guarantee is one of payment of the Guarantor’s Contribution Percentage of the Guarantee d Obligations and not collection.

(d) Other than defenses to the payment of the Guarantee d Obligations that are available to the Parent under the Merger Agreement and subject to Section1 of this Limited Guarantee , to the fullest extent permitted by Law, the Guarantor unconditionally and irrevocably waives any and all rights or defenses arising by reason of any applicable Law which would otherwise require any and all notice of the creation, renewal, extension or accrual of any of the Guarantee d Obligations and notice of or proof of reliance by the Guarantee d Party upon this Limited Guarantee or acceptance of this Limited Guarantee (except for notices to be provided to Parent and White& Case LLP in accordance with Section9.02 of the Merger Agreement). Except as provided in Section2 of this Limited Guarantee , when pursuing its respective rights and remedies under this Limited Guarantee against the Guarantor, the Guarantee d Party shall be under no obligation to pursue such rights and remedies it may have against Parent or any other Person for the Guarantee d Obligations or any right of offset with respect to the Limited Guarantee . Except as provided in Section2 of this Limited Guarantee , any failure by the Guarantee d Party to pursue such other rights or remedies or to collect any payments from Parent or any such other Person or to realize upon or to exercise any such right of offset, and any release by the Guarantee d Party of any right of offset, shall not relieve the Guarantor of any liability under this Limited Guarantee , and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of the Guarantee d Party.

6. Subrogation. The Guarantor unconditionally and irrevocably agrees not to exercise any rights that it may now have or after the date of this Limited Guarantee acquire against Parent or any other Person interested in the transactions contemplated by the Merger Agreement, whether or not such claim arises by contract or operation of law (including, without limitation, any such right arising under bankruptcy or insolvency laws) or otherwise prior to the termination of this Limited Guarantee . The rights referred to in the immediately preceding sentence include, without limitation, any right of subrogation, reimbursement, exoneration, contribution, and any right to participate in any claim or remedy of the Guarantee d Party against Parent or such other Person, by reason of the existence, payment, performance, or enforcement of the Guarantee d Obligations under or in respect of this Limited Guarantee , including without limitation, the right to take or receive from Parent or such other Person, directly or indirectly, in case of other property by setoff or in any other manner, payment or security on account of such claim, remedy of right prior to the termination of this Limited Guarantee .

8. Continuing Guarantee . Unless terminated pursuant to the provisions of Section7 of this Limited Guarantee , and subject to the relief of the Guarantor’s obligations in accordance with second paragraph of Section1 of this Limited Guarantee , this Limited Guarantee is a continuing one and shall remain in full force and effect until the indefeasible payment and satisfaction in full of the Guarantee d Obligations, shall be binding upon the Guarantor and its successors and assignees, and shall inure to the benefit of, and be enforceable by, the Guarantee d Party and its successors and permitted assigns. All obligations to which this Limited Guarantee applies or may apply under the terms of this Limited Guarantee shall be conclusively presumed to have been created in reliance on this Limited Guarantee .

(b) All Actions arising out of or relating to this Limited Guarantee shall be heard and determined in the Court of Chancery of the State of Delaware or, (but only if the Court of Chancery of the State of Delaware declines to accept jurisdiction over any Action) the Superior Court of the State of Delaware (Complex Commercial Division) and any appellate court from any such court (such courts, the “Selected Courts”). The parties to this Limited Guarantee irrevocably: (i)submit to the exclusive jurisdiction and venue of the Selected Courts in any such Action; (ii)waive the defense of an inconvenient forum or lack of jurisdiction to the maintenance of any such Action brought in the Selected Courts; (iii)agree to not contest the jurisdiction of the Selected Courts in any such Action, by motion or otherwise; and (iv)agree to not bring any Action arising out of or relating to this Limited Guarantee in any court other than the Selected Courts, except for Actions brought to enforce the judgment of any such court. The consents to jurisdiction and venue set forth in this Section9.08(b)shall not constitute general consents to service of process in the State of Delaware and shall have no effect for any purpose except as provided in this paragraph and shall not be deemed to confer rights on any Person other than the parties to this Limited Guarantee . Each party to this Limited Guarantee agrees that service of process upon such party in any Action arising out of or relating to this Limited Guarantee shall be effective if notice is given by Federal Express, UPS, DHL or similar courier service to the address set forth in Section12 of this Limited Guarantee . The parties to this Limited Guarantee agree that a final judgment in any such Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law. Nothing in the foregoing shall restrict any party’s rights to seek any post-judgment relief regarding, or any appeal from, a final trial court judgment.

16. Severability. If any term, condition or other provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced by any ruleof Law or public policy: (a)such provision shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall be enforced to the greatest extent permitted by Law; (b)such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied: (i)to other Persons or circumstances; or (ii)in any other jurisdiction; and (c)such unenforceability or prohibition shall not affect or invalidate any other provision of this Limited Guarantee . This Limited Guarantee may not be enforced with respect to the Guarantee d Obligations without giving effect to the limitations provided in Section1 of this Limited Guarantee and to the provisions of Sections 5 and 7 of this Limited Guarantee . No party to this Limited Guarantee shall assert, and each party shall cause its respective Affiliates not to assert, that this Limited Guarantee or any part of this Limited Guarantee is invalid, illegal or unenforceable.

The spot market price is determined by the COES and is the price at which generation companies sell or buy power on the spot market during each 15-minute period. All injections and withdrawals of electricity are valued at the spot market price of the 15-minute period when they are made. Any generation companies with excess generation over energy sold pursuant to PPAs in each 15-minute interval, sell their excess energy at spot prices to generation companies with lower generation than their contractual obligations under PPAs for that time period. COES defines, on a monthly basis, the amounts that are owed by each generator with a net “buyer” position to generators with a net “seller” position. Generators with a net seller position directly invoice and collect from generators with a net buyer position the amounts liquidated by COES, respectively, not being COES involved in the payment procedure or providing any form of payment guarantee . Distribution companies and regulated consumers cannot purchase power off the grid at spot prices. Distribution companies must enter into agreements that guarantee offtakes of regulated consumers located in their concession areas. Regulated consumers must enter into agreements with distribution companies or, in the case of a large consumer, may contract directly with power generation companies.

04/22/2016 (Kenon Holdings Ltd.)

With relation to the above, Kenon provided a RMB350 million ($54 million) guarantee of this financing agreement to Chery for up to 50% of Chery’s Guarantee . As at December31, 2015, Qoros had drawn down the Facility of RMB700 million ($108 million) with an interest rate of 5.39%. The fair value of the guarantee has been recorded in the financial statements.

Under our guarantee , we have guarantee d the performance of all payment obligations of Goldman Sachs Bank USA under the specified CDs, on the terms set forth in the guarantee agreement. By a “specified CD” we mean a certificate of deposit issued or to be issued by Goldman Sachs Bank USA at any time and from time to time in the past or the future, provided, that, the confirmation of sale of such certificate of deposit, the disclosure statement or any other offering document relating to such certificate of deposit, the instrument governing such certificate of deposit (including any master certificate of deposit), or the books and records of Goldman Sachs Bank USA or its affiliates expressly states that the obligations of Goldman Sachs Bank USA under such certificate of deposit will be entitled to the benefit of our guarantee . Consequently, all other certificates of deposit issued or to be issued by Goldman Sachs Bank USA are not “specified CDs” and are not covered by our guarantee or the guarantee agreement. There is currently no limit on the amount of specified CDs that may be issued by Goldman Sachs Bank USA.

07/10/2017 (GOLDMAN SACHS GROUP INC)

We may use this prospectus in the initial sales of specified CDs covered by our guarantee . In addition, Goldman Sachs& Co. LLC or any of our other affiliates may use this prospectus in market-making transactions in specified CDs covered by our guarantee after their initial sale. Unless the purchaser is informed otherwise in the confirmation of sale, this prospectus is being used in a market-making transaction.

We have filed a registration statement on Form S-3 with the SEC relating to our guarantee . This prospectus is a part of the registration statement and does not contain all of the information in the registration statement. Whenever a reference is made in this prospectus to a contract or other document of The Goldman Sachs Group, Inc., please be aware that the reference is only a summary and that you should refer to the exhibits that are a part of the registration statement for a copy of the applicable contract or other document. You may review a copy of the registration statement at the SEC’s public reference room in Washington, D.C., as well as through the SEC’s Internet site.

The specified CDs will be deposit liabilities of GS Bank, unconditionally and irrevocably guarantee d by The Goldman Sachs Group, Inc. pursuant to our guarantee . Except to the extent FDIC insurance is available from the FDIC, no entity other than GS Bank or The Goldman Sachs Group, Inc. will have any obligation, contingent or otherwise, to make any payments in respect of the specified CDs. Accordingly, GS Bank and The Goldman Sachs Group, Inc. will be dependent on their respective assets and earnings to generate the funds necessary to meet their respective obligations with respect to the specified CDs. If GS Bank’s and The Goldman Sachs Group, Inc.’s assets and earnings are not adequate, GS Bank and The Goldman Sachs Group, Inc. may be unable to make payments in respect of the specified CDs and you could lose that part of your deposit, if any, that is not covered by FDIC insurance.

We have been advised by GS Bank that the specified CDs, together with our guarantee , are being offered from time to time by GS&Co. and may also be offered by any of our other affiliates pursuant to brokerage agreements signed with GS Bank from time to time. GS&Co. and our other affiliates involved in the distribution of the specified CDs, and our guarantee , may be deemed to be “underwriters” as that term is defined in the Securities Act with respect to our guarantee . We refer to GS&Co. and any such other affiliates as the “distributors” in this prospectus.

The notes will be liabilities of GS Bank, unconditionally and irrevocably guarantee d by The Goldman Sachs Group, Inc. pursuant to our guarantee . However, the notes will be general unsecured obligations, not deposit liabilities, of GS Bank and will not be insured by the FDIC. In the event of a liquidation or other resolution of GS Bank, the notes, as general obligations of GS Bank, will generally be subordinated in right of payment to the claims of deposit holders. No entity other than GS Bank or The Goldman Sachs Group, Inc. will have any obligation, contingent or otherwise, to make any payments in respect of the notes. Accordingly, GS Bank and The Goldman Sachs Group, Inc. will be dependent on their respective assets and earnings to generate the funds necessary to meet their respective obligations with respect to the notes. If GS Bank’s and The Goldman Sachs Group Inc.’s assets and earnings are not adequate, GS Bank and The Goldman Sachs Group, Inc. may be unable to make payments in respect of the notes and you could lose your entire investment in your note.

• we or any permitted successor or assignee owns all of the trust common securities of the successor entity and guarantee s the obligations of the successor entity under the successor securities at least to the extent provided by the related guarantee . Notwithstanding the foregoing, an Issuer Trust will not, except with the consent of holders of 100% in liquidation amount of the related capital securities (voting together as a single class), merge, consolidate or amalgamate with or into, be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity, or permit any other entity to consolidate, amalgamate or merge with or into or replace it, if such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease would cause the Issuer Trust or the successor entity to be classified as an association taxable as a corporation or as other than a grantor trust for U.S. federal income tax purposes.

We have, through the applicable guarantee , the applicable trust agreement, the applicable series of corresponding subordinated debt securities, the subordinated debt indenture and the applicable expense agreement, taken together, fully, irrevocably and unconditionally guarantee d all of the Issuer Trust’s obligations under the related capital securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes a guarantee . It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of an Issuer Trust’s obligations under its capital securities. See “Relationship Among the Capital Securities and the Related Instruments” below.

Our obligations under each expense agreement will be subordinated in right of payment to the same extent as each guarantee . Our obligations under each expense agreement will be subject to provisions regarding amendment, termination, assignment, succession and governing law similar to those applicable to each guarantee .

Payments of distributions and other amounts due on the capital securities (to the extent the related Issuer Trust has funds available for the payment of such distributions) are irrevocably guarantee d by us as described above under “— Guarantee s and Expense Agreements—The Guarantee s”. Taken together, our obligations under each series of corresponding subordinated debt securities, the subordinated debt indenture, the related trust agreement, the related expense agreement, and the related guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the related capital securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes a guarantee . It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of the Issuer Trust’s obligations under the related capital securities. If and to the extent that we do not make payments on any series of corresponding subordinated debt securities, the Issuer Trust will not pay distributions or other amounts due on its related capital securities. The guarantee s do not cover payment of any amounts when the related Issuer Trust does not have sufficient funds to pay such amounts. In such an event, the remedy of a holder of any capital securities is to institute a legal proceeding directly against us pursuant to the terms of the subordinated debt indenture for enforcement of our obligations under the corresponding subordinated debt securities. Our obligations under each guarantee are subordinate and junior in right of payment to all of our senior indebtedness.

Our obligations under the expense agreement are subordinated in right of payment to the same extent as the guarantee . Our obligations under the expense agreement are subject to provisions regarding amendment, termination, assignment, succession and governing law similar to those applicable to the guarantee .

The Trust’s business and affairs are conducted by its trustees, each appointed by us as sponsor of the Trust. The trustees are The Bank of New York Mellon, as the property trustee, or “Property Trustee,” and BNY Mellon Trust of Delaware, as the Delaware trustee, or “Delaware Trustee,” and two or more individual trustees, or “administrative trustees,” who are employees or officers of or affiliated with us. The Property Trustee act as sole trustee under each Trust Agreement for purposes of compliance with the Trust Indenture Act and also acts as trustee under the Guarantee . See “Description of the Guarantee ” below.

The payment of distributions out of money held by a Trust, and payments upon redemption of the APEX or liquidation of the Trust, are guarantee d by us to the extent described under “Description of the Guarantee .” Each Guarantee , when taken together with our obligations under the applicable Trust Agreement, including our obligations to pay costs, expenses, debts and liabilities of the Trust, other than with respect to its Common Securities and APEX, has the effect of providing a full and unconditional guarantee of amounts due on the APEX. The Bank of New York Mellon, as the Guarantee Trustee, holds the Guarantee for the benefit of the holders of the APEX. The Guarantee s do not cover payment of distributions when the Trusts do not have sufficient available funds to pay those distributions.

The following is a brief description of the terms of the Guarantee . The description does not purport to be complete in all respects and is subject to and qualified in its entirety by reference to the Guarantee , copies of which are available upon request from us as described under “Summary — Where can I find additional information?” above.

• equally with any of our other present or future obligations that by their terms rank pari passu with such Guarantee . Each Guarantee constitutes a guarantee of payment and not of collection, which means that the guarantee d party may sue the guarantor to enforce its rights under the Guarantee without suing any other person or entity. Each Guarantee is held for the benefit of the holders of APEX. Each Guarantee will be discharged only by payment of the guarantee payments in full to the extent not paid by the applicable Trust. To the fullest extent permitted by applicable law, each holder of APEX has the right to institute a proceeding directly against us for enforcement of the rights of a holder of Preferred to the extent of an interest in the Preferred corresponding to the aggregate liquidation amount of such holder’s APEX.

The holders of a majority in liquidation amount of the applicable APEX have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of a Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under the Guarantee . Any holder of APEX may institute a legal proceeding directly against us to enforce the Guarantee Trustee’s rights and our obligations under a Guarantee , without first instituting a legal proceeding against the Trust, the Guarantee Trustee or any other person or entity.

(c) To the fullest extent permitted under applicable Law and subject to Section ‎2‎(f) below, the Guarantor hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guarantee d Obligations and notice of or proof of reliance by the Guarantee d Party upon this Limited Guarantee or acceptance of this Limited Guarantee . Without expanding the obligations of the Guarantor hereunder, the Guarantee d Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Limited Guarantee , and all dealings between Parent and/or the Guarantor, on the one hand, and the Guarantee d Party, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Limited Guarantee . When pursuing any of its rights and remedies hereunder against the Guarantor, the Guarantee d Party shall be under no obligation to pursue (or elect among) such rights and remedies it may have against Parent, Merger Sub, any Other Guarantor or any other Person for the Guarantee d Obligations or any right of offset with respect thereto, and any failure by the Guarantee d Party to pursue (or elect among) such other rights or remedies or to collect any payments from Parent or any such other Person or to realize upon or to exercise any such right of offset, and any release by the Guarantee d Party of Parent or any such other Person or any right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of the Guarantee d Party, and to the extent permitted by Law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of any Law which would otherwise require any such pursuit or election, in each case subject to Section 2(a).

11/20/2020 (China Biologic Products Holdings, Inc.)

6. Continuing Guarantee . Unless terminated pursuant to the provisions of Section ‎5 hereof, this Limited Guarantee is a continuing one and shall remain in full force and effect until the payment and satisfaction in full of the Guarantee d Obligations (subject to the Maximum Amount), shall be binding upon the Guarantor, its successors and permitted assigns, and shall inure to the benefit of, and be enforceable by, the Guarantee d Party and its successors, permitted transferees and permitted assigns; provided that notwithstanding anything to the contrary in this Limited Guarantee , the provisions of this Limited Guarantee that are for the benefit of any Non-Recourse Party (including the provisions of Sections ‎3, ‎5 and ‎16) shall indefinitely survive any termination of this Limited Guarantee for the benefit of the Guarantor and any such Non-Recourse Party.

(c) The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Limited Guarantee . When a reference is made in this Limited Guarantee to a Section, such reference shall be to a Section of this Limited Guarantee unless otherwise indicated. The word “including” and words of similar import when used in this Limited Guarantee shall mean “including, without limitation,” unless otherwise specified.

3. Limited Guarantee . Concurrently with the execution and delivery of this letter agreement, Sponsor is executing and delivering to the Company a limited guarantee , dated as of the date hereof, related to certain payment obligations of Parent and Merger Sub under the Merger Agreement (the “Limited Guarantee ”). The Company’s (i) remedies against Sponsor and its successors and assigns under the Limited Guarantee , (ii) remedies against Parent and Merger Sub and their respective successors and assigns under the Merger Agreement, and (iii) remedies against Sponsor and its successors and assigns pursuant to the Company Third Party Beneficiary Rights (as defined below) hereunder shall be, and are intended to be, the sole and exclusive direct or indirect remedies available to the Company, any of the direct or indirect shareholder of the Company or any of its subsidiaries, any Affiliate of the Company or such shareholder, or any of the Affiliates, equity holders, controlling persons, directors, officers, employees, members, managers, general or limited partners, representatives, advisors or agents of the foregoing against Sponsor or any of the Sponsor Affiliates (as defined below) in respect of any liabilities, losses, damages, obligations or recoveries of any kind (including special, exemplary, consequential, indirect or punitive damages or damages arising from loss of profits, business opportunities or goodwill, diminution in value or any other losses or damages, whether at law, in equity, in contract, in tort or otherwise) arising under, or in connection with any breach of the Merger Agreement (whether willfully, intentionally, unintentionally or otherwise) or of the failure of the Merger to be consummated for any reason or otherwise in connection with the transactions contemplated hereby and thereby or in respect of any representations made or alleged to have been made in connection therewith (whether or not Parent or Merger Sub’s breach is caused by the breach by Sponsor of its obligations under this letter agreement).

SECTION3.08. Guarantee . Concurrently with the execution of this Agreement, Parent has delivered to the Company the duly executed guarantee of each Guarantor, dated as of the date of this Agreement, in favor of the Company in respect of certain of Parent’s obligations under, or in connection with, this Agreement, the Merger and the other Transactions (each, a “ Guarantee ”). Each Guarantee is (a)a legal, valid and binding obligation of the applicable Guarantor, (b)enforceable against the applicable Guarantor in accordance with its terms, except as such enforceability may be limited by the Bankruptcy and Equity Exception and (c)in full force and effect. As of the date of this Agreement, no event has occurred which (with or without notice, lapse of time, or both), would or would reasonably be expected to constitute a default or breach on the part of the applicable Guarantor under any Guarantee .

03/02/2020 (CINCINNATI BELL INC)

Section17.01.The Guarantee . The Guarantor hereby unconditionally guarantee s to the Trustee and each Holder of a Security authenticated and delivered by the Trustee all obligations of the Company under this Indenture in accordance with the terms of the Subordinated Debt Securities Guarantee Agreement.

09/22/2020 (PARTNERRE LTD)

Section5.01 Guarantee . The Guarantor hereby irrevocably and unconditionally guarantee s to each Holder the due and punctual payment of the principal of, any premium and interest on, and any Additional Amounts, if applicable, with respect to any Debenture held by such Holder, when and as the same shall become due and payable, whether at maturity, by acceleration, redemption, repayment or otherwise, in accordance with the terms of such Debenture and of the Indenture, and to the Trustee payment of all amounts due to the Trustee relating to the performance of its duties under the Indenture. The Guarantor further agrees that, as between the Guarantor, on the one hand, and the Holders and the Guarantee Trustee, on the other hand, the maturity of the Debentures guarantee d hereby may be accelerated as provided in Article5 of the Indenture for the purposes of this Guarantee , notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Debentures guarantee d hereby.

Section5.06Limitation on Liability. The Guarantor, and by its acceptance of Debentures of any series, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee not constitute a fraudulent transfer or conveyance for purposes of the United States Bankruptcy Code or any similar state law to the extent applicable to any Guarantee . Any term or provision of the Indenture to the contrary notwithstanding, the maximum aggregate amount of the obligations guarantee d hereunder by the Guarantor shall not exceed the maximum amount that can be hereby guarantee d without rendering the Indenture, as it relates to the Guarantor, or the Guarantee voidable or otherwise ineffective under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

The Company has, through the Guarantee , Trust Agreement, Junior Subordinated Debentures, Indenture and the Expense Agreement (each as defined herein), taken together, fully, irrevocably and unconditionally guarantee d all of Air T Funding’s obligations under the Capital Securities. See “Relationship Among the Capital Securities, the Junior Subordinated Debentures and the Guarantee -- Full and Unconditional Guarantee .” Under the Guarantee , the Company guarantee s the payment of Distributions by Air T Funding and payments on liquidation of or redemption of the Capital Securities (subordinate to the right to payment of Senior and Subordinated Debt of the Company, as defined herein) to the extent of funds held by Air T Funding. The Guarantee does not cover payment of Distributions when Air T Funding does not have sufficient funds to pay such Distributions. See “Description of Guarantee .” If the Company does not make required payments on the Junior Subordinated Debentures held by Air T Funding, Air T Funding will have insufficient funds to pay Distributions on the Capital Securities. In such event, a holder of the Capital Securities may institute a legal proceeding directly against the Company to enforce payment of such Distributions to such holder. See “Description of Junior Subordinated Debentures -- Enforcement of Certain Rights by Holders of the Capital Securities.” The obligations of the Company under the Guarantee and the Junior Subordinated Debentures are subordinate and junior in right of payment to all Senior and Subordinated Debt (as defined in “Description of Junior Subordinated Debentures -- Subordination”) of the Company.

05/29/2019 (AIR T INC)

Payments of Distributions and other amounts due on the Capital Securities (to the extent Air T Funding has funds available for the payment of such Distributions) are irrevocably guarantee d by the Company as and to the extent set forth under “Description of Guarantee .” Taken together, the Company’s obligations under the Junior Subordinated Debentures, the Indenture, the Trust Agreement, the Expense Agreement and the Guarantee provide, in the aggregate, a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the Capital Securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee . It is only the combined operation of those documents that has the effect of providing a full, irrevocable and unconditional guarantee of Air T Funding’s obligations under the Capital Securities. If and to the extent that the Company does not make payments on the Junior Subordinated Debentures, Air T Funding will not pay Distributions or other amounts due on the Capital Securities. The Guarantee does not cover payment of Distributions when Air T Funding does not have sufficient funds to pay such Distributions. In such event, the remedy of a holder of the Capital Securities is to institute a legal proceeding directly against the Company for enforcement of payment of such Distributions to such holder. The obligations of the Company under the Guarantee are subordinate and junior in right of payment to all Senior and Subordinated Debt.

The Guarantor shall be subrogated to all (if any) rights of the Holders of Capital Securities against Air T Funding in respect of any amounts paid to such Holders by the Guarantor under this Capital Securities Guarantee ; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Capital Securities Guarantee , if, at the time of any such payment, any amounts are due and unpaid under this Capital Securities Guarantee . If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders.

Dividends on the preference shares are payable quarterly on a non-cumulative basis, only when, as and if declared by the Board, on March15, June15, September15 and December15 of each year at a fixed rate equal to 8.00% per annum on the liquidation preference, commencing on September15, 2009. In the event that, during the term of the Guarantee , we do not pay full dividends in respect of any quarterly dividend period on any preference shares that are then issued and outstanding, the Guarantor has agreed to pay to the trustee, in trust, for the benefit of, and for further payment to, the holders of the preference shares an amount equal to such unpaid dividends or unpaid liquidation preference pursuant to the Guarantee . The terms of the Guarantee also provide that to the extent the Guarantor pays any unpaid dividends or liquidation preference, then the Guarantor will be subrogated against the Bank in respect of rights of payment that the holders of the preference shares would have had against the Bank but for the Guarantor's payment. Furthermore, if full dividends payable on the preference shares have not been paid by the Bank for an aggregate of six quarterly dividend periods or more (whether or not consecutive) the Guarantor shall have the right to appoint two persons to the Board of the Bank until such time as full dividends have been paid by the Bank on the preference shares for at least four consecutive quarterly dividend periods.

08/04/2016 (Bank of N.T. Butterfield & Son Ltd)

Following the capital raise on March2, 2010, the terms of the 4,279,601warrants with an exercise price of $7.01 previously issued to the Government of Bermuda in conjunction with the issuance of the preference shares in 2009 were adjusted in accordance with the terms of the Guarantee . Subsequently, the Government of Bermuda now holds 4.32million (2014: 4.30million) warrants with an exercise price of $3.47 (2014: $3.49) with an expiration date of June22,2019.

Following the capital raise on March2, 2010, the terms of the 4,279,601 warrants with an exercise price of $7.01 previously issued to the Government of Bermuda in conjunction with the issuance of the preference shares in 2009 were adjusted in accordance with the terms of the Guarantee . Subsequently, the Government of Bermuda now holds 4.32million (December31, 2015: 4.32million) warrants with an exercise price of $3.47 (December31, 2015: $3.47) with an expiration date of June22, 2019.

The Bank considers the fees collected in connection with the issuance of standby letters of credit and letters of guarantee to be representative of the fair value of its obligation undertaken in issuing the guarantee . In accordance with applicable accounting standards related to guarantee s, the Bank defers fees collected in connection with the issuance of standby letters of credit and letters of guarantee . The fees are then recognised in income proportionately over the life of the credit agreements. The following table presents the outstanding financial guarantee s. Collateral is shown at estimated market value less selling cost. Where the collateral is cash, it is shown gross including accrued income.

(j) Unpaid Dividends Guarantee . If the Bank does not pay, on any Dividend Payment Date, a full dividend on the Preference Shares in respect of the corresponding Dividend Period during the Term, holders of the Preference Shares shall have the rights and benefits with respect to the Guarantor set forth in Section4.1 of the Guarantee Agreement.

Section2.3 Not Responsible for Recitals or Issuance of Guarantee . The recitals contained in this Guarantee Agreement shall be taken as the statements of the Bank and the Guarantor, and the Guarantee Trustee does not assume any responsibility for their correctness. The Guarantee Trustee makes no representation as to the validity or sufficiency of this Guarantee Agreement, the Certificate of Designation, the Warrant or the Preference Shares.

Section4.8 Reinstatement of Guarantee . The obligation by the Guarantor to make any Guarantee Payment or to pay all or any portion of the Liquidation Payment Price or the Guarantee End Date Put Price pursuant to Sections 4.1, 4.2 and 4.3 hereof will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preference Shares or this Guarantee Agreement.

(c)To the fullest extent permitted under applicable Law and subject to Section‎2‎(f)below, the Guarantor hereby waives any and all notice of the creation, renewal, extension or accrual of any of the Guarantee d Obligations and notice of or proof of reliance by the Guarantee d Party upon this Limited Guarantee or acceptance of this Limited Guarantee . Without expanding the obligations of the Guarantor hereunder, the Guarantee d Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Limited Guarantee , and all dealings between Parent and/or the Guarantor, on the one hand, and the Guarantee d Party, on the other, shall likewise be conclusively presumed to have been had or consummated in reliance upon this Limited Guarantee . When pursuing any of its rights and remedies hereunder against the Guarantor, the Guarantee d Party shall be under no obligation to pursue (or elect among) such rights and remedies it may have against Parent, Merger Sub, any Other Guarantor or any other Person for the Guarantee d Obligations or any right of offset with respect thereto, and any failure by the Guarantee d Party to pursue (or elect among) such other rights or remedies or to collect any payments from Parent or any such other Person or to realize upon or to exercise any such right of offset, and any release by the Guarantee d Party of Parent or any such other Person or any right of offset, shall not relieve the Guarantor of any liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of Law, of the Guarantee d Party, and to the extent permitted by Law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of any Law which would otherwise require any such pursuit or election, in each case subject to Section2(a).

XML 24 R15.htm IDEA: XBRL DOCUMENT /* Do Not Remove This Comment */ function toggleNextSibling (e) { if (e.nextSibling.style.display=='none') { e.nextSibling.style.display='block'; } else { e.nextSibling.style.display='none'; } } v3.10.0.1 Restricted cash and short term deposits 9 Months Ended Sep. 30, 2018 Supplemental Cash Flow Elements [Abstract] Restricted cash and short term deposits RESTRICTED CASH AND SHORT-TERM DEPOSITSOur restricted cash and short-term deposits balances are as follows:(in thousands of $)September30, 2018December 31, 2017Restricted cash relating to the total return equity swap69,38258,351Restricted cash in relation to the Hilli(1)175,482174,737Restricted cash and short-term deposits held by lessor VIEs188,434130,063Restricted cash relating to the $1.125 billion debt facility22,98633,752Restricted cash relating to office lease818813Bank guarantee 67499Total restricted cash and short-term deposits457,776397,815Less: Amounts included in current restricted cash and short-term deposits(302,456)(222,265)Long-term restricted cash155,320175,550(1) In November 2015, in connection with the issuance of a letter of credit by a financial institution to our project partner involved in the Hilli FLNG project, we were required to provide cash collateral to support the performance guarantee . The following table identifies the balance sheet line-items included in cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows:(in thousands of $)September30, 2018December 31, 2017September30, 2017December 31, 2016Cash and cash equivalents306,387214,862286,562224,190Restricted cash and short-term deposits (current portion)302,456222,265270,087183,693Restricted cash (non-current portion)155,320175,550182,416232,335764,163612,677739,065640,218 X - DefinitionThe entire disclosure for supplemental cash flow activities, including cash, noncash, and part noncash transactions, for the period. Noncash is defined as information about all investing and financing activities of an enterprise during a period that affect recognized assets or liabilities but that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.

11/16/2018 (GOLAR LNG LTD)

XML 42 R33.htm IDEA: XBRL DOCUMENT /* Do Not Remove This Comment */ function toggleNextSibling (e) { if (e.nextSibling.style.display=='none') { e.nextSibling.style.display='block'; } else { e.nextSibling.style.display='none'; } } v3.10.0.1 Restricted cash and short term deposits (Tables) 9 Months Ended Sep. 30, 2018 Supplemental Cash Flow Elements [Abstract] Restrictions on Cash and Cash Equivalents Our restricted cash and short-term deposits balances are as follows:(in thousands of $)September30, 2018December 31, 2017Restricted cash relating to the total return equity swap69,38258,351Restricted cash in relation to the Hilli(1)175,482174,737Restricted cash and short-term deposits held by lessor VIEs188,434130,063Restricted cash relating to the $1.125 billion debt facility22,98633,752Restricted cash relating to office lease818813Bank guarantee 67499Total restricted cash and short-term deposits457,776397,815Less: Amounts included in current restricted cash and short-term deposits(302,456)(222,265)Long-term restricted cash155,320175,550(1) In November 2015, in connection with the issuance of a letter of credit by a financial institution to our project partner involved in the Hilli FLNG project, we were required to provide cash collateral to support the performance guarantee . Schedule of Cash Flow, Supplemental Disclosures The following table identifies the balance sheet line-items included in cash, cash equivalents and restricted cash presented in the consolidated statements of cash flows:(in thousands of $)September30, 2018December 31, 2017September30, 2017December 31, 2016Cash and cash equivalents306,387214,862286,562224,190Restricted cash and short-term deposits (current portion)302,456222,265270,087183,693Restricted cash (non-current portion)155,320175,550182,416232,335764,163612,677739,065640,218 X - DefinitionTabular disclosure of supplemental cash flow information for the periods presented.

3.Enforceability. Except as provided in the immediately following sentence, this letter agreement may be enforced only by Parent at the direction of the Sponsor, and, nothing set forth in this letter agreement shall be construed to confer upon or give to the Partnership, the Partnership GP or any other Person (including Parent’s, Merger Sub’s, the Partnership’s and the Partnership GP’s respective direct and indirect creditors), other than the parties hereto and their respective successors and permitted assigns, any benefits, rights or remedies under or by reason of this letter agreement, or any rights to enforce the Commitment or to cause Parent to enforce the Commitment. Notwithstanding the foregoing, if the Partnership or the Partnership GP is entitled to specific performance in accordance with Section9.8(b) of the Merger Agreement to cause the Commitment to be funded, the Partnership or the Partnership GP may enforce Parent’s right to cause the Commitment to be funded by the Sponsor without the direction of the Sponsor, and in such event and solely to such extent each of the Partnership or the Partnership GP will be deemed an express third-party beneficiary of Parent’s rights under this letter agreement. For the avoidance of doubt, the Partnership or the Partnership GP may pursue enforcement of its rights under both this letter agreement and that certain Limited Guarantee by the Sponsor in favor of the Partnership (the “Limited Guarantee ”), or either of them; provided, that the Partnership or the Partnership GP shall only be entitled to actually enforce its rights under either this letter agreement or the Limited Guarantee . The exercise by Parent, the Partnership or the Partnership GP of any right to enforce this letter agreement does not give rise to any other remedies, monetary or otherwise.

04/24/2019 (American Midstream Partners, LP)

6. Continuing Guarantee . Unless terminated pursuant to the provisions of Section5 hereof, this Limited Guarantee is a continuing one and shall remain in full force and effect until the indefeasible payment and satisfaction in full of the Guarantee d Obligations (subject to the Maximum Amount), shall be binding upon the Guarantor, its successors and assigns, and shall inure to the benefit of, and be enforceable by, the Guarantee d Party and its successors, permitted transferees and permitted assigns; provided that notwithstanding anything to the contrary in this Limited Guarantee , the provisions of this Limited Guarantee that are for the benefit of any Non-Recourse Party (including the provisions of Sections3, 5 and 16) shall indefinitely survive any termination of this Limited Guarantee for the benefit of the Guarantor and any such Non-Recourse Party. All obligations to which this Limited Guarantee applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon.

06/17/2020 (BITAUTO HOLDINGS LTD)

*** The Enhanced Death Benefit is payable on death of the Covered Life with a Single Life Guarantee . If a Joint Life Guarantee is elected, on death of one Covered Life, the surviving Covered Life can choose to continue the Contract3 and all Riders. The Enhanced Death Benefit will then be payable to the Beneficiary upon the death of the surviving Covered Life.

04/15/2019 (PENN MUTUAL VARIABLE ANNUITY ACCOUNT III)

The Rider can be purchased as a Single or Joint Life Guarantee . Under a Single Life Guarantee , all Rider features and benefits are based on the age and lifetime of the Covered Life, and the Enhanced Death Benefit is payable on death of the Covered Life. Under a Joint Life Guarantee , all Rider features are based on the age of the younger Covered Life. If a Joint Life Guarantee is elected, upon the first death of a Covered Life, the surviving Covered Life, if permitted by federal tax law, can choose to continue the Contract14 and the Rider, and the Enhanced Death Benefit will then be payable to the Beneficiary upon the death of the surviving Covered Life. You must specify both Covered Lives in the Application for a Joint Life Guarantee . A death benefit available at the death of the Owner prior to the later death of the Covered Lives is the Standard Death Benefit if the deceased Owner was sole Annuitant. If the Second Covered Life was also named Joint Annuitant, the death benefit payable on death of the Owner / Annuitant is Contract Value only.

You cannot convert a Single Life Guarantee to a Joint Life Guarantee . You will not be able to add a Covered Life after the Rider Effective Date.

The Rider will terminate upon the death of a sole Covered Life for a Single Life Guarantee , or the later death of both Covered Lives for a Joint Life Guarantee . The Death Benefit, including the Death Benefit Enhancement provided by this Rider, will then be distributed as described below.

The Enhanced Death Benefit is payable upon the death of the Covered Life under the Rider, or the later death of two Covered Lives with a Joint Life Guarantee . The amount payable is the Death Benefit Enhancement, which is the amount (capped at $1,000,000.00) by which the Enhanced Death Benefit Base exceeds the Standard Death Benefit payable under the Contract. The Death Benefit Enhancement amount is determined as of the date our Administrative Office receives proof of death of the Covered Life (both Covered Lives for a Joint Life Guarantee ) such as a death certificate or other official document establishing death, and other documents required to process the payment.

Lifetime Withdrawal Guarantee .The Guarantee d Growth and Income Benefit Rider (also referred to as “Rider” throughout this section) is an optional benefit that provides a Lifetime Withdrawal Guarantee — payments for the lifetime of the Covered Life (with a Single Life Guarantee ), or for the lifetime of the last surviving Covered Life (with a Joint Life Guarantee ). This Rider provides for a guarantee d lifetime withdrawal benefit adjusted for the Guarantee d Growth Increase and market Step-Ups. The Guarantee d Growth Increase provides a simple interest increase22 to the Withdrawal Benefit Base for a period of 10 years, while market Step-Ups lock in the market performance annually (if higher than the Guarantee d Growth Increase). The Withdrawal Benefit Base is accumulated in this way before withdrawals under the Lifetime Withdrawal Guarantee are exercised. The Lifetime Withdrawal Guarantee is then based on this Withdrawal Benefit Base and provides lifetime income at eligible ages. Lifetime income is guarantee d as a percentage of the Withdrawal Benefit Base that varies with age at the time the Lifetime Withdrawal Guarantee is exercised (based on the age of the younger Covered Life). After the start of withdrawals, the Guarantee d Annual Withdrawal Amount will be adjusted for market Step-Ups only ( Guarantee d Growth Increases will stop). Payments will be made for the life of the Covered Life or for the lifetime of the last surviving Covered Life for a Joint Life Guarantee .

Table of Contents Withdrawal Benefit Base. You will most benefit from this Rider if you delay your lifetime withdrawals to allow your Withdrawal Benefit Base to increase with the Guarantee d Growth and/or market Step-Ups. Lifetime income becomes available starting at age 55, and guarantee d withdrawal percentages vary based on the age at which you exercise your Lifetime Withdrawal Guarantee . Withdrawal percentages are based on the age of the younger Covered Life, if you elect the Joint Life Guarantee .

The Rider can be purchased as a Single or Joint Life Guarantee . Under a Single Life Guarantee , all Rider features and benefits are measured using the age and lifetime of the sole Covered Life, who is also the sole Annuitant. Under a Joint Life Guarantee , all Rider features are measured using the age of the younger Covered Life, and all lifetime benefits are payable over the lifetime of the last survivor of the Covered Lives. You must specify both Covered Lives in the Application for a Joint Life Guarantee .

Table of Contents If you have started withdrawals under the Lifetime Withdrawal Guarantee of the Rider, the Joint Life Guarantee cannot be converted to a Single Life Guarantee . The Covered Life can be removed from the Contract by the Contract Owner(s) (provided that all Owner / Annuitant requirements are satisfied), but the charge for the Rider would remain at the Joint Life Guarantee charge, and all features and benefits of the Rider will continue to be based upon the age/lifetime of the original Covered Lives.

The current Rider Charge for a Single Life Guarantee is 1.10% (1.05% for Contracts purchased prior to March15, 2013), and 1.25% for a Joint Life Guarantee . The Maximum Rider Charge is 2.00%. Current and Maximum Rider Charges, as well as the Maximum Charge Increases are summarized in the “Rider Charges” subsection in Section3.2 — “Periodic Charges”.

If you request a withdrawal before the Lifetime Withdrawal Guarantee becomes available to you (based on the age of the younger Covered Life), it will be treated as an Early Access Withdrawal, which can be taken as a one-time distribution or periodically under the Systematic Withdrawal option, and the Contract will remain in the Deferral Phase. If the withdrawals are set up systematically, the Contract will remain in the Deferral Phase until the request is received by the Company with instructions to enter the Withdrawal Phase and to exercise the Lifetime Withdrawal Guarantee . There may be tax implications to taking withdrawals prior to age 59 1/2. See Section14 — “Taxes” for more information.

If you request a withdrawal after the Lifetime Withdrawal Guarantee becomes available to you (based on the age of the younger Covered Life), your Lifetime Withdrawal Guarantee will be exercised, and the Contract will move into the Withdrawal Phase. If you wish to remain in the Deferral Phase, you must specifically request an Early Access Withdrawal, which can be taken as a one-time distribution or systematically. If you request to receive an Early Access Withdrawal systematically, your Contract will remain in the Deferral Phase until you send us a request with instructions to enter the Withdrawal Phase and exercise the Lifetime Withdrawal Guarantee . There may be tax implications to taking withdrawals prior to age 59 1/2. See Section14 — “Taxes” for more details.

Your Lifetime Withdrawal Guarantee provides lifetime withdrawals up to the Guarantee d Annual Withdrawal Amount for the lifetime of the Covered Life or for the lifetime of the last surviving Covered Life for a Joint Life Guarantee . The Guarantee d Annual Withdrawal Amount is adjusted for Guarantee d Growth and Contract Value Step-Ups. The Lifetime Withdrawal Guarantee is only available if the younger Covered Life at the time of the first Lifetime Withdrawal is 55 or older. Termination of the Rider or the Contract will result in termination of payments under this guarantee (please refer to Section9.17 — “Termination of the Guarantee d Growth and Income Benefit Rider” for more details).

The Lifetime Withdrawal Rate is used to determine the amount of your lifetime withdrawals ( Guarantee d Annual Withdrawal Amount). The age at the time the Lifetime Withdrawal Guarantee is first exercised determines the Lifetime Withdrawal Rate. For a Single Life Guarantee , the Lifetime Withdrawal Rate is based on the Actual Age of the Covered Life at the time you exercise the Lifetime Withdrawal Guarantee . For a Joint Life Guarantee , the Lifetime Withdrawal Rate is based on the Actual Age of the younger Covered Life at the time you exercise the Lifetime Withdrawal Guarantee (referred to as “age” or “Actual Age” in the section below).

The Guarantee d Growth and Income Benefit Rider will terminate upon the death of the sole Covered Life for a Single Life Guarantee , or later death of both Covered Lives for a Joint Life Guarantee . The Death Benefit will then be distributed according to the death settlement options available under the terms of the Base Contract.

The Combination Rider can be purchased as a Single or Joint Life Guarantee . Under a Single Life Guarantee , all Rider features and benefits are measured using the age and lifetime of the Covered Life, and the Enhanced Death Benefit is payable on death of the Covered Life. Under a Joint Life Guarantee , all Rider features are measured using the age of the younger Covered Life. If a Joint Life Guarantee is elected, upon the first death of a Covered Life, the surviving Covered Life can choose to continue the Contract25 and the Combination Rider, and the Enhanced Death Benefit will then be payable to the Beneficiary upon the death of the surviving Covered Life. You must specify both Covered Lives in the Application for a Joint Life Guarantee . A death benefit available at the death of the Owner (or Annuitant if the Owner is a non-natural person) prior to the later death of the Covered Lives is Contract Value only.

If you have started withdrawals under one of the Living Benefit Guarantee withdrawal options of the Rider, the Joint Life Guarantee cannot be converted to a Single Life Guarantee . The Covered Life can be removed from the Contract by the Contract Owner(s) (provided that all Owner / Annuitant requirements are satisfied), but the features and benefits provided under a Joint Life Guarantee will still apply.

Table of Contents Withdrawal Phase Inflation Increase Period — Lifetime Withdrawal Guarantee .In the Withdrawal Phase under the Lifetime Withdrawal Guarantee (described in Section11.10 — “Withdrawal Options under the Rider — Lifetime Withdrawal Guarantee under the Living Benefit Guarantee ”), Inflation Increases will be applied to the Withdrawal Benefit Base as long as the Contract Value is greater than zero within the Withdrawal Phase.

The Lifetime Withdrawal Rate is used to determine the amount of the Guarantee d Annual Withdrawal Amount under the Lifetime Withdrawal Guarantee . The Lifetime Withdrawal Rate is the sum of the Age-Based Lifetime Withdrawal Rate (shown in the table below) and the Effective Waiting Bonus (see below) if applicable. For a Single Life Guarantee , the Actual Age of the Covered Life at the time the Lifetime Withdrawal Guarantee is first exercised determines the Age-Based Lifetime Withdrawal Rate. For a Joint Life Guarantee , the Actual Age of the younger Covered Life at the time the Lifetime Withdrawal Guarantee is first exercised determines the Age-Based Lifetime Withdrawal Rate.

The Standard Withdrawal Benefit Balance is used to determine how long the benefit will last under the Standard Withdrawal Guarantee . The Standard Withdrawal Benefit Balance is established at the time you enter the Withdrawal Phase under the Standard Withdrawal Guarantee , and is set equal to the Withdrawal Benefit Base at this time. The Standard Withdrawal Benefit Balance will decrease for withdrawals less than or equal to the Guarantee d Annual Withdrawal Amount by the amount of the Withdrawal up to the Standard Annual Reduction (described below). The Standard Withdrawal Benefit Balance will step-up to the Contract Value at the time of an Automatic Annual Step-Up of the Withdrawal Benefit Base to the Contract Value (if applicable).

The Standard Annual Reduction is the maximum amount by which the Standard Withdrawal Benefit Balance is reduced when a withdrawal up to the Guarantee d Annual Withdrawal Amount is taken. The Standard Annual Reduction is established at the time you enter the Withdrawal Phase under the Standard Withdrawal Guarantee . At this time, the Standard Annual Reduction will be set equal to the Standard Withdrawal Rate multiplied by the Withdrawal Benefit Base and will initially be equal to the Guarantee d Annual Withdrawal Amount. While the Guarantee d Annual Withdrawal Amount may increase thereafter as a result of Inflation Increases, the Standard Annual Reduction will not. The Standard Annual Reduction will be recalculated upon Automatic Annual Step-Up of the Withdrawal Benefit Base to the Contract Value, and may decrease upon an Excess Withdrawal.

• If the Withdrawal Benefit Base is greater than zero and you are eligible for the Living Benefit Guarantee , and the Lifetime Withdrawal Guarantee is available (based on age of the younger Covered Life), the Contract will be annuitized using the Lifetime Withdrawal Guarantee . The Guarantee d Annual Withdrawal Amount will be determined based on the Withdrawal Benefit Base at the time of Annuitization and the then applicable Lifetime Withdrawal Rate (based on age of the younger Covered Life). The Lifetime Withdrawal Rate is based on the Age-Based Lifetime Withdrawal Rate and Waiting Bonus (if applicable) at the time the Contract Value is reduced to zero. Inflation Increases will no longer be credited to the Withdrawal Benefit Base after the Contract Value is reduced to zero in the Deferral Phase.

• If the Contract is in the Deferral Phase as of the Annuity Date, but the Lifetime Withdrawal Guarantee is not available based on the age of the younger Covered Life, the Contract will be annuitized using the Standard Withdrawal Guarantee . The Guarantee d Annual Withdrawal Amount will be determined based on the Withdrawal Benefit Base at the time of Annuitization and the lowest available Standard Withdrawal Rate. This amount will be payable annually until the Standard Withdrawal Benefit Balance is reduced to zero or the lifetime of the last surviving Covered Life, whichever is earlier. After Annuitization, Inflation Increases and Step-Ups will no longer apply.

Single Life Guarantee . A Single Life Guarantee is issued when a sole Covered Life is specified in the Additional Contract Specifications. The Covered Life under the Single Life Guarantee must be the sole Annuitant. The Covered Life must also be a Contract Owner, unless the Contract Owner is an entity. Minimum withdrawals under the Lifetime Withdrawal Guarantee will be made for the lifetime of the Covered Life.

Joint Life Guarantee . A Joint Life Guarantee is issued when two Covered Lives are specified in the Additional Contract Specifications. One Covered Life must be the Annuitant, and the second Covered Life must either be a Joint Annuitant or a Contingent Annuitant. At least one Covered Life must be a Contract Owner, and any non-Owner Covered Life must be the sole primary Beneficiary. If Covered Lives are both Owners, they must be each other’s sole primary Beneficiary. Minimum withdrawals under the Lifetime Withdrawal Guarantee will continue for the lifetime of the last surviving Covered Life. A Joint Life Guarantee may be continued upon Contract Owner’s death only if permitted by federal law.

Replacing a Covered Life under a Joint Life Guarantee . If withdrawals have not started under one of the Living Benefit Guarantee withdrawal options of the Rider, and provided that all Owner / Annuitant designation requirements outlined in the Contract are satisfied, the Covered Life may be replaced by the Contract Owner(s). All features and benefits of the Rider will be based on the younger Covered Life (after replacement), and any Covered Life must also meet issue age requirements at time of designation.

Impact of Divorce. Upon divorce, unless the divorce decree provides otherwise, the Contract Owner(s) has(have) the following options: (1)change the Rider from a Joint Life Guarantee to a Single Life Guarantee (subject to conditions outlined under “Converting a Joint Life Guarantee to a Single Life Guarantee ” above); (2) keep the Joint Life Guarantee , but replace a Covered Life (subject to conditions outlined under “Replacing a Covered Life under a Joint Life Guarantee ” above); or (3)terminate the Rider, thereby eliminating the Living Benefit Guarantee . The Company will attempt to accommodate any other arrangements provided in a divorce decree. Any change or transfer of ownership as a result of divorce is subject to the change in ownership provisions of the Contract.

Living Benefit Guarantee . This Rider provides the Contract Owner(s) with guarantee d minimum withdrawals under the Living Benefit Guarantee withdrawal options. It allows the Contract Owner(s) to receive Guarantee d Annual Withdrawal Amounts based on the Withdrawal Benefit Base as described below. Under the Rider, the Contract will have two distinct phases. The period prior to the exercise of the first withdrawal taken under the Living Benefit Guarantee is called the Deferral Phase. The period during which withdrawals are taken under the Living Benefit Guarantee is called the Withdrawal Phase.

Withdrawal requested before Living Benefit Guarantee becomes available. If a withdrawal is requested before the Living Benefit Guarantee becomes available, it will be treated as a Deferral Phase Withdrawal, which can be taken as a one-time distribution or on a periodic basis under the “Systematic Withdrawals” provision. If Deferral Phase Withdrawals are set up systematically, the Contract will remain in the Deferral Phase until the request is received by the Company with instructions to enter the Withdrawal Phase and exercise the Living Benefit Guarantee . There may be tax implications to taking withdrawals prior to age 59 1⁄2.

Standard Withdrawal Guarantee . Under the Standard Withdrawal Guarantee , the Company guarantee s withdrawals up to the Guarantee d Annual Withdrawal Amount (based on the Withdrawal Benefit Base) until the Standard Withdrawal Benefit Balance is reduced to zero, or for the lifetime of the last surviving Covered Life (whichever ends earlier).

Lifetime Withdrawal Guarantee . Under the Lifetime Withdrawal Guarantee , the Company guarantee s withdrawals up to the Guarantee d Annual Withdrawal Amount (based on the Withdrawal Benefit Base) for the lifetime of the last surviving Covered Life.

The Bank will not be required to proceed against or enforce any other rights or Security or claim payment from any person before claiming from the Guarantor under this Guarantee . This applies irrespective of any law or provision of a Finance Document to the contrary.

11/05/2020 (PLURISTEM THERAPEUTICS INC)

The amount paid will be the greater of (i) the calculated Fixed Account value after application of the MVA and (ii) the Floor Guarantee . Consequently, in this example the amount paid as a result of the full Withdrawal request is the Floor Guarantee amount of $339,330. The Floor Guarantee limits the amount of the MVA actually assessed, which is effectively -3.05% (the “Effective MVA”) instead of the normal -10%.

02/02/2018 (VOYA INSURANCE & ANNUITY Co)

The Effective MVA may limit the MVA calculated under the Contract to ensure that upon full Withdrawal the net proceeds do not fall below the Floor Guarantee . The Effective MVA is calculated as follows [Floor Guarantee ÷ Fixed Account value]-1. Therefore, in this example the Effective MVA calculation is [$339,330 ÷ $350,000] – 1 = -3.05%.

Because the Floor Guarantee ($339,330) exceeds the Fixed Account value after application of the negative MVA, but does not exceed the total Fixed Account value immediately prior to the Withdrawal, the Fixed Account value ($350,000) is adjusted to equal the amount of the Floor Guarantee . In this example, the Fixed Account value is reduced by -3.05%, which is the Effective MVA actually assessed instead of the normal ‑10%.

Following the conclusion of this meeting and on June 13, 2020, Wilson Sonsini and Fenwick exchanged comments on the drafts of the form of the equity commitment letter and form of the limited guarantee . Fangda also exchanged comments with Hankun on representations and warranties of the Company relating to its PRC operations.

07/06/2020 (58.com Inc.)

11.Termination. This letter agreement and the obligation of each Warburg Entity to fund the Equity Commitment will terminate automatically and immediately upon the earliest to occur of (a)the valid termination of the Merger Agreement in accordance with its terms,(b)the Closing, at which time such obligation will be discharged but subject to performance of such obligation, (c)the Company or any of its Affiliates directly or indirectly (i)asserting a claim or initiate a proceeding against the Parent, the Merger Sub, any Warburg Entity, any Non-Recourse Party (as defined in the Limited Guarantee ) in connection with or relating to this letter agreement, the Merger Agreement, the Limited Guarantee , or any of the transactions contemplated under the Merger Agreement (other than a claim seeking an order of specific performance of such Warburg Entity’s obligation to make the Equity Commitment in the circumstances provided for in Section4(a), or seeking payment pursuant to the terms of a Limited Guarantee , or seeking specific performance pursuant to the Merger Agreement), or (ii)asserting that the Cap on Sponsor’s aggregate liabilities hereunder (or, with respect to any Warburg Entity, asserting that the limitation of such Warburg Entity’s aggregate liabilities hereunder up to its Pro Rata Percentage of the Cap) or the Cap (as defined in each Other Sponsor Equity Commitment Letter) on any Other Sponsor’s liabilities is illegal, invalid or unenforceable in whole or in part, and (d)any event which, by the terms of the Limited Guarantee , is an event which terminates the Sponsor’s liabilities under the Limited Guarantee . Upon termination of this letter agreement, all rights and obligations of the Sponsor hereunder with respect to the Equity Commitment shall terminate, and no Warburg Entity shall have any further liabilities hereunder. Notwithstanding anything to the contrary in this letter agreement, the provisions set forth in this letter agreement that are for the benefit of any Non-Recourse Party (as defined in the Limited Guarantee ) shall indefinitely survive any termination of this letter agreement.

2.Nature of Guarantee . The Guarantee d Party shall not be obligated to file any claim relating to the Obligations in the event that Parent or Merger Sub becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Guarantee d Party to so file shall not affect the Guarantor’s obligations hereunder. Subject to the terms hereof, the Guarantor’s liability hereunder is absolute, unconditional, irrevocable and continuing irrespective of any modification, amendment or waiver of or any consent to departure from the Merger Agreement that may be agreed to by Parent or Merger Sub. In the event that any payment to the Guarantee d Party hereunder in respect of the Obligations is rescinded or must otherwise be returned for any reason whatsoever (other than as set forth in the last sentence of Section8 hereof), the Guarantor shall remain liable hereunder with respect to the Guarantee d Percentage of such Obligations, subject to the terms and conditions hereof (including the Cap), as if such payment had not been made. This Limited Guarantee is an unconditional guarantee of payment and not of collection. This Limited Guarantee is a primary obligation of the Guarantor and is not merely the creation of a surety relationship, and the Guarantee d Party shall not be required to proceed against Parent or Merger Sub first before proceeding against the Guarantor hereunder. Notwithstanding anything herein to the contrary, the Guarantor shall have the right to assert, and shall have the benefit of, any defenses to the payment of the Obligations that are available to Parent or Merger Sub under the Merger Agreement or as otherwise expressly provided in Section3(a)hereof, other than defenses arising from bankruptcy, reorganization or similar proceeding of Parent or Merger Sub.

3.Limited Guarantee . Concurrently with the execution and delivery of this letter agreement, the Sponsor is executing and delivering to the Company an amended and restated limited guarantee (the “Limited Guarantee ”) guarantee ing the Guarantee d Percentage (as defined in the Limited Guarantee ) of the Obligations (as defined in the Limited Guarantee ). Other than with respect to the Retained Claims (as such term is defined under the Limited Guarantee ) and subject to Section4, the Company’s remedies against the Sponsor under the Limited Guarantee (as set forth in and in accordance with the terms of the Limited Guarantee ) shall be, and are intended to be, the sole and exclusive direct or indirect remedies (whether at Law or in equity, whether sounding in contract, tort, statute or otherwise) available to the Company and its Affiliates against the Sponsor and the Non-Recourse Parties (as defined in the Limited Guarantee ) in respect of any claims, liabilities or obligations arising out of or relating to this letter agreement, the Merger Agreement and the Transactions, including in the event Parent or Merger Sub breaches its obligations under the Merger Agreement, whether or not Parent’s or Merger Sub’s breach is caused by the Sponsor’s breach of its obligations under this letter agreement.

03/14/2019 (eHi Car Services Ltd)

(d)The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Limited Guarantee . When a reference is made in this Limited Guarantee to a Section, such reference shall be to a Section of this Limited Guarantee unless otherwise indicated. The word “including” and words of similar import when used in this Limited Guarantee will mean “including, without limitation,” unless otherwise specified.

(c)Each of the IIA Parties agrees and confirms that each Terminated Equity Commitment Letter and each Terminated Limited Guarantee is hereby irrevocably terminated and is of no further force and effect, including any provision of such Terminated Equity Commitment Letter or Terminated Limited Guarantee that by its terms would otherwise have survived the termination or expiration of such Terminated Equity Commitment Letter or Terminated Limited Guarantee . From and after the date hereof, neither the Baring Sponsors nor Redstone shall have any further obligations or liabilities under their respective Terminated Equity Commitment Letters and Terminated Limited Guarantee s.

SECTION 5.9 Guarantee . The Lender shall have received executed counterparts of the Guarantee , dated as of the date hereof, duly executed and delivered by each Subsidiary.

11/09/2017 (Natera, Inc.)

SECTION 5.13. Counterparts. This Guarantee may be executed by the parties hereto in several counterparts, each of which shall be an original and all of which shall constitute together but one and the same agreement. This Guarantee shall become effective when counterparts hereof executed on behalf of each Guarantor shall have been received by the Lender. Delivery of an executed counterpart of a signature page to this Guarantee by email (e.g. “pdf” or “tiff”) or telecopy shall be effective as delivery of a manually executed counterpart of this Guarantee . The words “execution,” “signed,” “signature,” and words of like import in this Guarantee shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

SECTION 3. Full Force of Guarantee . Except as expressly supplemented hereby, the Guarantee shall remain in full force and effect in accordance with its terms.

9. NATURE OF GUARANTEE . The Guarantor’s liability hereunder is absolute, unconditional, irrevocable and continuing irrespective of any modification, amendment or waiver of or any consent to departure from the Merger Agreement that may be agreed to by Parent or Merger Sub. The Guarantee d Party shall not be obligated to file any claim relating to the Obligations in the event that Parent or Merger Sub becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Guarantee d Party to so file shall not affect the Guarantor’s obligation hereunder. In the event that any payment to the Guarantee d Party in respect of any of the Obligations is rescinded or must otherwise be returned for any reason whatsoever, the Guarantor shall remain liable hereunder with respect to the Guarantee d Percentage of such Obligations, subject to the terms and conditions hereof, as if such payment had not been made. This Limited Guarantee is a primary and original obligation of the Guarantor and an unconditional and continuing guarantee of payment and is not of collection or merely the creation of a surety relationship, and the Guarantee d Party shall not be required to initiate any legal proceedings against Parent or Merger Sub before proceeding against the Guarantor hereunder.

02/04/2021 (Ruhnn Holding Ltd)

This charge is the maximum charge we guarantee . We may charge less than the maximum charge, and the charge may vary by Class. Note that Classincludes the Policy form to which this Rider is attached.

05/09/2019 (PACIFIC SELECT EXEC SEPARATE ACCT PACIFIC LIFE INS)

Each such charge is described below and may vary by Class. Note that Classincludes the Policy form to which this Rider is attached. The charges described here are maximum charges we guarantee . We may charge less than these maximum charges as described in Changes to Rider Charges, below.

The Limited Guarantee .Simultaneously with the execution of the Merger Agreement, the Equity Investors provided Smart& Final with a limited guarantee (the "Limited Guarantee ") pursuant to which each Equity Investor, severally and not jointly, guarantee s the payment and performance of Parent's obligations to Smart& Final with respect to the payment of the Parent Termination Fee, the Enforcement Expenses, certain reimbursement and indemnification obligations related to financing cooperation and damages resulting from fraud or willful breach of the Merger Agreement to the extent such damages survive termination of the Merger Agreement, in each case, subject to a maximum aggregate obligation of $32.5million and the other terms and conditions of the Limited Guarantee .

05/14/2019 (Smart & Final Stores, Inc.)

12. Governing Law; Jurisdiction; Venue. This Limited Guarantee shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws. In any action or proceeding arising out of or relating to this Limited Guarantee , each of the Parties: irrevocably and unconditionally (a)consents and submits to the exclusive jurisdiction and venue of the Chosen Courts; (b)irrevocably consents to service of process by first class certified mail, return receipt requested, postage prepaid, to the address at which such Party is to receive notice in accordance with Section9.9 of the Merger Agreement; and (c)agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court. Each of the Parties irrevocably waives any and all right to trial by jury in any Legal Proceeding between the Parties (whether based on contract, tort or otherwise), including any counterclaim, arising out of or relating to this Limited Guarantee or the actions of any Party in the negotiation, administration, performance and enforcement of this Limited Guarantee . Each Party: (i)makes this waiver voluntarily; and (ii)acknowledges that such Party has been induced to enter into this Limited Guarantee by, among other things, the mutual waivers contained in this Section12.

8. CONTINUING GUARANTEE . (a) Subject to the last sentence of Section3(d), this Limited Guarantee may not be revoked or terminated and shall remain in full force and effect and shall be binding on the Guarantor, its successors and assigns until the earliest to occur of (i)all of the Obligations (subject to the Cap) payable under this Limited Guarantee having been paid in full by the Guarantor, (ii)the Effective Time, (iii)the termination of the Merger Agreement in accordance with its terms by mutual consent of Parent and the Guarantee d Party or under circumstances in which Parent and Merger Sub would not be obligated to pay the Parent Termination Fee under Section8.06(b) of the Merger Agreement and (iv)ninety (90) days after any termination of the Merger Agreement in accordance with its terms under circumstances in which Parent and Merger Sub would be obligated to pay the Parent Termination Fee under Section8.06(b) of the Merger Agreement if the Guarantee d Party has not presented a bona fide written claim for payment of any Obligation to the Guarantor by such 90th day; provided that if the Guarantee d Party has presented such claim to the Guarantor by such date, this Limited Guarantee shall terminate upon the date such claim is finally satisfied or otherwise resolved by agreement of the parties hereto or pursuant to Section10. The Guarantor shall have no further obligations under this Limited Guarantee following termination in accordance with this Section8.

04/09/2018 (eHi Car Services Ltd)

(b)This Guarantee is a guarantee of payment and performance and not of collection. The Creditor shall not be obligated to (i) enforce or exhaust its remedies against the Corporation or any other Person or under the Convertible Debenture or any other document, (ii) realize on any security, collateral, or other guarantee s that it may hold at any time in connection with the Guarantee d Obligations or (iii)take any other action before proceeding to enforce this Guarantee . The liability of the Guarantor to make payment under this Guarantee shall arise immediately upon delivery to it of a written demand for payment hereunder.

04/18/2019 (Rise Gold Corp.)

(c)No waiver by a party will affect the exercise of any other rights or remedies by that party under this Guarantee . Any failure or delay by a party in exercising any right or remedy will not constitute, or be deemed to constitute, a waiver by that party of that right or remedy. No single or partial exercise by a party of any right or remedy will preclude any other or further exercise by that party of any right or remedy.

The Creditor possesses and will possess information relating to the Corporation that is and may be material to this Guarantee . The Creditor has no obligation to disclose to the Guarantor any information that it may now or later possess concerning the Corporation.

6.No Recourse. Neither of the Guarantors shall have any obligations under or in connection with this Limited Guarantee except as provided by this Limited Guarantee . No liability shall attach to, and no recourse shall be had by the Guarantee d Party, any of its Affiliates or any Person purporting to claim by or through any of them or for the benefit of any of them, under any theory of liability (including without limitation by attempting to pierce a corporate or other veil or by attempting to compel any party to enforce any actual or purported right that they may have against any Person) against any former, current or future equity holders, controlling Persons, directors, officers, employees, agents, general or limited partners, managers, members or Affiliates of any of the Guarantors, Merger Sub or Parent, or any former, current or future equity holders, controlling Persons, directors, officers, employees, agents, general or limited partners, managers, members or Affiliates of any of the foregoing, excluding however the Guarantors, Parent and Merger Sub (collectively, the “Non-Recourse Parties”) in any way under or in connection with this Limited Guarantee , the Merger Agreement, any other agreement or instrument executed or delivered in connection with this Limited Guarantee or the Merger Agreement or the transactions contemplated hereby or thereby, except for claims (i) against any Guarantor and his or her successors and assigns under this Limited Guarantee pursuant to the terms hereof, and (ii) for the avoidance of doubt, against Parent and Merger Sub and their respective successors and assigns under the Merger Agreement pursuant to the terms thereof.

05/31/2016 (E-COMMERCE CHINA DANGDANG INC.)

2. NATURE OF GUARANTEE . The Guarantee d Party shall not be obligated to file any claim relating to the Guarantee d Obligations in the event that Parent or Merger Sub becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Guarantee d Party to so file shall not affect each Guarantor’s obligations hereunder. In the event that any payment to the Guarantee d Party in respect of any Guarantee d Obligations is rescinded or must otherwise be returned for any reason whatsoever, the Guarantors shall remain liable hereunder with respect to such Guarantee d Obligations as if such payment had not been made (subject to such Guarantor’s respective Pro Rata Maximum Amount, to the extent applicable). This Limited Guarantee is an unconditional guarantee of payment and not of collectability, and the Guarantee d Party shall not be required to proceed against Parent or Merger Sub first before proceeding against the Guarantors hereunder or to pursue any other remedy in the Guarantee d Party’s power whatsoever. Subject to the terms hereof, each Guarantor’s liability hereunder is absolute, unconditional, irrevocable and continuing irrespective of any modification, amendment or waiver of or any consent to departure from the Merger Agreement that may be agreed to by Parent or Merger Sub. Each Guarantor reserves the right to assert as a defense to such payment by the Guarantors under this Limited Guarantee any rights, remedies and defenses that Parent or Merger Sub may have with respect to payment of any Guarantee d Obligations under the Merger Agreement, other than defenses arising from bankruptcy or insolvency or Parent or Merger Sub and other defenses expressly waived herein.

10/02/2020 (Newater Technology, Inc.)

9. CONTINUING GUARANTEE .This Limited Guarantee shall remain in full force and effect and shall be binding on each Guarantor, his or her successors and assigns until all of the Guarantee d Obligations have been fully performed. Notwithstanding the foregoing, this Limited Guarantee shall terminate and each Guarantor shall have no further obligations under this Limited Guarantee as of the earliest of: (i) the Effective Time, if the Closing occurs, (ii) the payment in full of the Guarantee d Obligations; and (iii) the date falling six (6) months from the date of the termination of the Merger Agreement in accordance with its terms if the Guarantee d Party has not presented a bona fide written claim for payment of any Guarantee d Obligation to any Guarantor by such date; provided that if the Guarantee d Party has presented such a bona fide written claim by such date, this Limited Guarantee shall terminate upon the date that such claim is finally resolved and payment in full of any amounts required to be paid in respect of such final resolution. If any payment or payments made by Parent or Merger Sub, or any part thereof, are subsequently invalidated, declared to be fraudulent or preferential, set aside or are required to be repaid to a trustee, receiver or any other person under any bankruptcy act, state or federal law, common law or equitable cause, then to the extent of such payment or payments, the Guarantee d Obligations or part thereof hereunder intended to be satisfied shall be revived and continued in full force and effect as if said payment or payments had not been made.

10. NO RECOURSE.Each Guarantor shall have no obligations under or in connection with this Limited Guarantee except as expressly provided by this Limited Guarantee . No liability shall attach to, and no recourse shall be had by the Guarantee d Party, any of its Affiliates or any Person purporting to claim by or through any of them or for the benefit of any of them, under any theory of liability (including, without limitation, by attempting to pierce a corporate or other veil or by attempting to compel any party to enforce any actual or purported right that they may have against any Person) against any former, current or future equity holders, controlling Person, directors, officers, employees, agents, general or limited partners, managers, members or Affiliates of any of Guarantor, Merger Sub or Parent, or any former, current or future equity holders, controlling Persons, directors, officers, employees, agents, general or limited partners, managers, members or Affiliates of any of the foregoing, excluding however the Guarantors, Parent, Merger Sub, Rollover Shareholders and their respective successors and assigns (each, a “Non-Recourse Party”, and collectively, the “Non-Recourse Parties”) in any way under or in connection with this Limited Guarantee , the Merger Agreement, any other agreement or instrument executed or delivered in connection with this Limited Guarantee or the Merger Agreement or the transactions contemplated hereby or thereby, except for claims (i) against the Guarantors and their respective successors and assignees under and to the extent provided in this Limited Guarantee , the Share Subscription Agreement, and the Rollover Agreement, in each case, pursuant to the terms thereof, (ii) against Parent or Merger Sub under and to the extent provided in the Merger Agreement, and (iii) against Parent and the Rollover Shareholders under and to the extent provided in the Voting Agreement and the Rollover Agreement (theclaims described in clauses(i) through(iii), collectively, the “Retained Claims”).

On February3, 2020, Advent provided a revised proposal to acquire Forescout for $32.00 per Share in cash. This proposal was accompanied by a revised draft of the Original Merger Agreement and the accompanying drafts of the equity commitment letter and limited guarantee . We refer to such original equity commitment letter and limited guarantee as the “Original Equity Commitment Letter” and the “Original Limited Guarantee ,” respectively. Among other things, Advent’s proposed revisions to the draft of the Original Merger Agreement included the removal of the “go-shop” provision but accepted Forescout’s proposal related to the amount of the termination fee payable by Forescout in order to accept a superior acquisition proposal from a third party after entry into the Original Merger Agreement with Advent.

07/20/2020 (FORESCOUT TECHNOLOGIES, INC)

Merger Sub or any other Person of any right of set-off or offset, will not relieve such Guarantor of any liability under this Guarantee (subject to such Guarantor’s Cap), and will not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Company. Notwithstanding any other provision of this Guarantee , the Merger Agreement or otherwise to the contrary, the Company covenants and agrees that each Guarantor may assert, as a defense to payment or performance by such Guarantor under this Guarantee , or as an affirmative claim against the Company or any of the Company Related Parties, any rights, remedies, set-offs and defenses that Parent or Merger Sub could assert pursuant to the terms of the Merger Agreement or pursuant to any applicable Law in connection with the Merger Agreement (other than any such rights, remedies, set-offs and defenses arising out of, due to, or as a result of the insolvency or bankruptcy of Parent or Merger Sub). To the extent that either of Parent or Merger Sub is relieved of any of its obligations and liabilities under the Merger Agreement, including its obligations to pay the Parent Termination Fee (other than due to, in connection with or as a result of the insolvency or bankruptcy of Parent or Merger Sub), the Guarantors shall be similarly relieved of the Parent Fee Obligations under this Guarantee . Notwithstanding anything to the contrary in this Guarantee or otherwise, any payment made by or on behalf of Parent or Merger Sub to the Company with respect to any Guarantee d Obligation shall reduce the total obligations of the Guarantors under this Guarantee accordingly on a pro rata basis, based on the percentages set forth on Schedule A hereto.

(f) No Obligation. The Company will not be obligated to file any claim relating to any of the Guarantee d Obligations if Parent or Merger Sub becomes subject to an insolvency, bankruptcy, reorganization or similar proceeding, and the failure of the Company to so file will not affect any Guarantor’s obligations under this Guarantee . If any payment to the Company in respect of any of the Guarantee d Obligations is rescinded or must otherwise be returned for any reason whatsoever, each Guarantor will remain fully liable under this Guarantee , subject to the terms hereof, with respect to the Guarantee d Obligations (subject to such Guarantor’s Cap) as if such payment had not been made. If the Company is prevented pursuant to applicable Law or otherwise from demanding or accelerating payment of any of the Guarantee d Obligations from Parent or Merger Sub by reason of any automatic stay or otherwise, the Company will be entitled to receive from each Guarantor, upon demand therefor, the sums that otherwise would have been due hereunder, in each case subject to such Guarantor’s Cap, had such demand or acceleration occurred.

7. Entire Agreement; Third Party Beneficiaries. This Guarantee , collectively with the Merger Agreement and the Equity Commitment Letter, constitutes the entire agreement with respect to the subject matter hereof and supersedes any and all prior discussions, negotiations, proposals, undertakings, understandings and agreements, whether written or oral, among Parent, Merger Sub and the Guarantors or any of their Affiliates, on the one hand, and the Company or any of its Affiliates, on the other hand, including, but not limited to, the Original Guarantee . This Guarantee is not intended to and will not confer upon any Person any rights or remedies under this Guarantee , other than the Parties and the Non-Recourse Parties, as provided in Section4 (which are third party beneficiaries of Section4). The rights of the Non-Recourse Parties set forth in Section4 of this Guarantee may be enforced by the Non-Recourse Parties without a requirement that such enforcement be at the direction of any Guarantor.

TORTIOUS CONDUCT OR OTHERWISE) DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTEE . EACH PARTY ACKNOWLEDGES AND AGREES THAT (a)NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (b)IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER; (c)IT MAKES THIS WAIVER VOLUNTARILY; AND (d)IT HAS BEEN INDUCED TO ENTER INTO THIS GUARANTEE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION14.

(a) References to this Guarantee . Unless the context of this Guarantee otherwise requires, when a reference is made in this Guarantee to a Section, that reference is to a Section of this Guarantee .

(m) Joint Drafting. The Parties agree that they have been represented by legal counsel during the negotiation and execution of this Guarantee . Accordingly, they waive the application of any Law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the Party drafting such agreement or document.

(2) If Party A requires Party B to provide full amount of guarantee (including but not limited to third party guarantee , property mortgage and pledge provided by Party B or any third party) before Party A extends the loan to Party B, Party B shall provide guarantee in line with Party A’s requirements and ensure the continuous validity of the guarantee . Both parties shall sign corresponding guarantee contracts and complete guarantee procedures, or otherwise Party A shall have the right to refuse to extend the loan.

09/26/2019 (ECMOHO Ltd)

(2) If Party A requires Party B to provide full amount of guarantee (including but not limited to third party guarantee , property mortgage and pledge provided by Party B or any third party) before Party A accepts the commercial draft issued by Party B, Party B shall provide guarantee in line with Party A’s requirements and ensure the continuous validity of the guarantee . Both parties shall sign corresponding guarantee contracts and complete guarantee procedures, or otherwise Party A shall have the right to refuse to accept the commercial draft issued by Party B.

In order to ensure the fulfillment of the contract between Party A and Shanghai Tonggou Information Technology Co., Ltd. (hereinafter referred to as the debtor), Party B is willing to provide Party A with the maximum joint and several liability guarantee . Party A and Party B, intending to be legally bound, hereby agree to enter into this Contract upon consensus through negotiation.

The Guarantor confirms that the address listed herein or otherwise kept in in the Bank for the purpose of the communication, or the address of the Guarantor or its service agent (if applicable) shall be the address of receiving the notice or document (including documents sent by a court or arbitration institution or in connection with a lawsuit or arbitration) hereunder or related to the Letter of Guarantee . For the Guarantor, any notice or document sent to, retained in or returned from the above-mentioned designated address, or the domicile or place of residence of the Guarantor will be deemed to have been served on the Guarantor.

7. The pledge hereunder is a guarantee other than any other warranty, mortgage, pledge or guarantee (no matter whether provided by the debtor of the guarantee d obligations) held by the Bank, and is not restricted or affected by such other warranty, mortgage, pledge or guarantee . No matter whether such other warranty, mortgage, pledge or guarantee exists or is waived or changed, our guarantee responsibilities hereunder will not be changed or be exempted from and the pledge hereunder will be still enforceable. The Bank may execute the pledge hereunder, or any other warranty or guarantee (no matter whether provided by the debtor of the guarantee d obligations), exercise any rights or require us or any other person to make a payment.

If Party B requests A to open an independent guarantee letter to the beneficiary, Party A has the right to independently review the claim documents based on the letter of guarantee . Whether the claim documents submitted by the beneficiary meet the requirements of the letter of guarantee shall be subject to the opinions of Party A. Party A is entitled to accept or reject the discrepancies in the claim form of the letter of guarantee . Where Party A believes that the documents submitted by the beneficiary meet the requirements of the Letter of Guarantee (including the case where Party A accepts the discrepancies in the claim documents), it has the right to directly deduct Party B’s account funds or advances for external compensation without prior notice to Party B or Party B’s consent.

8.2 Party A has the right not to accept Party B’s application for modification/cancellation of Letter of Guarantee . Party B has known that the modification and cancellation of the Letter of Guarantee must be confirmed by the beneficiary in writing to be executed.

8.3 Party B may affix Party B’s reserved seal to the application for modification/cancellation of the Letter of Guarantee . Party A and Party B unanimously approve the validity of the seal.

1.8 In respect of the business of the Letter of Guarantee /customs tax payment guarantee /ticket guarantee paid by the applicant for application for use of credit granting, the transfer of the interest or interest of the relevant guarantee letter does not affect the warranty obligation of the Guarantor under this guarantee . The Guarantor promises not to raise any defense on this ground.

In the case of a mortgage, pledge guarantee or other Guarantor at the same time, the Bank shall be entitled to claim the security right separately, successively or simultaneously to the mortgagor/pledgor or Guarantor (including the Guarantor); the Bank’s waiver, change or release of the mortgage or pledge guarantee , or the change or release of the other Guarantor’s guarantee responsibility, or the delay of claiming the right to the mortgagor/pledgor or other Guarantor shall not affect the Guarantor’s guaranty liability under the Letter of Guarantee . The Guarantor is still obliged to bears joint and several liability for all credited debts owed by the Applicant to the Bank according to the Letter of Guarantee .

6.10 The Guarantor fails to settle the guarantee d debts in accordance with the provisions of this Letter of Guarantee . The Bank has the right to freeze/deduct any funds of the accounts opened by the Guarantor opened at China Merchants Bank or entrust other financial institutions to freeze/deduct the funds of the accounts opened by the Guarantor in the institution (if the guarantee d debt is not RMB, the Bank has the right to purchase the exchange directly from the Guarantor’s RMB account according to the exchange rate announced by the Bank at the time of deduction), until all debts owed by the Applicant to the Bank under the Credit Agreement are paid off. The Bank is entitled to seek recourse for the shortfall from the Guarantor.

(c)The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Limited Guarantee . When a reference is made in this Limited Guarantee to a Section, such reference shall be to a Section of this Limited Guarantee unless otherwise indicated. The word “including” and words of similar import when used in this Limited Guarantee shall mean “including, without limitation,” unless otherwise specified.

11/23/2020 (China Biologic Products Holdings, Inc.)

2.50%** * The current annual charge for the Guarantee d Growth and Income Benefit VI Rider is 1.25% for a Single Life Guarantee and 1.40% for a Joint Life Guarantee . The annual charge for the Guarantee d Growth and Income Benefit II, III, IV, and V Rider is 1.10% for a Single Life Guarantee and 1.25% for a Joint Life Guarantee . The annual charge is 1.05% for Guarantee d Growth and Income Benefit Rider Contracts purchased prior to March15, 2013. The Rider charge may not be increased beyond the maximum of 2.00%. The charge is expressed as an annual percentage; it will be assessed on the Withdrawal Benefit Base and will be deducted from the Contract Value on a quarterly basis.

11/02/2020 (PENN MUTUAL VARIABLE ANNUITY ACCOUNT III)

2. Nature of Limited Guarantee . The Guarantee d Party shall not be obligated to file any claim relating to the Obligations in the event that Parent becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Guarantee d Party to so file shall not affect the Guarantor’s obligation hereunder. In the event that any payment to the Guarantee d Party in respect of any Obligation is rescinded or must otherwise be returned for any reason whatsoever, the Guarantor shall remain liable hereunder with respect to such Obligation (subject to the terms and conditions hereof) as if such payment had not been made. This Limited Guarantee is an unconditional and continuing guarantee of payment and not of collection. Notwithstanding any other provision of this Limited Guarantee , the Guarantee d Party hereby agrees that the Guarantor may assert, as a defense to any payment or performance by the Guarantor under this Limited Guarantee , any defense to such payment or performance that the Parent Parties may have under the terms of the Merger Agreement, other than defenses arising exclusively from the bankruptcy or insolvency of any Parent Party.

04/09/2020 (ASTA FUNDING INC)

the benefit of any of the foregoing, may recover any amount whatsoever under the Limited Guarantee . Notwithstanding anything that may be expressed or implied in this letter agreement, the Merger Agreement, the Debt Financing Commitments, any other Transaction Document, the Limited Guarantee or any other document or instrument delivered in connection herewith or therewith or in connection with the transactions contemplated hereby or thereby (including the termination or abandonment thereof) or otherwise, for the avoidance of doubt, in no event shall any Equity Investor have any obligation to make any payment or contribution hereunder at any time if the Closing does not occur.

07/14/2016 (Diamond Resorts International, Inc.)

2.Nature of Guarantee . Subject to the terms hereof, the Guarantors’ liability hereunder is absolute, unconditional, irrevocable and continuing irrespective of any modification, amendment or waiver of or any consent to departure from the Merger Agreement that may be agreed to by Parent or Merger Sub. Without limiting the foregoing, the Guarantee d Party shall not be obligated to file any claim relating to the Guarantee d Obligations in the event that Parent or Merger Sub becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Guarantee d Party to so file shall not affect the Guarantors’ obligations hereunder. In the event that any payment hereunder is rescinded or must otherwise be, and is, returned to the Guarantors for any reason whatsoever, the Guarantors shall remain liable hereunder with respect to the Guarantee d Obligations (subject to the Cap) as if such payment had not been made. This Limited Guarantee is a guarantee of payment and not of collection. Notwithstanding anything herein to the contrary, the Guarantors shall have the right to assert, and shall have the benefit of, any defenses to the payment of the Guarantee d Obligations that are available to Parent or Merger Sub under the Merger Agreement or as otherwise expressly provided in Section 3 hereof.

12/02/2020 (China Distance Education Holdings LTD)

3. Limited Guarantee . Concurrently with the execution and delivery of this Agreement, Mr. Zhengdong Zhu and Ms. Baohong Yin are executing and delivering to the Company a limited guarantee related to certain of Parent’s and Merger Sub’s obligations under the Merger Agreement (the “Limited Guarantee ”). The parties hereto hereby agree and acknowledge that the Company’s Specific Performance Rights (as defined below) pursuant to clause ‎(ii) of the first sentence of Section ‎5 hereof, the Company’s rights against Parent and Merger Sub pursuant to the Merger Agreement and the Company’s right to assert any other Retained Claim (as defined in the Limited Guarantee ) against the Non-Recourse Party(ies) (as defined in the Limited Guarantee ) against which such Retained Claim may be asserted as set forth in Section ‎8 of the Limited Guarantee , shall be, and are intended to be, the sole and exclusive direct or indirect remedies available to the Company against the Sponsors or any other Non-Recourse Party in respect of any liabilities or obligations arising under, or in connection with, this Agreement, the Merger Agreement and the transactions contemplated hereby and thereby or the negotiation thereof, including in the event that Parent or Merger Sub breaches its obligations under the Merger Agreement, whether or not such breach is caused by the Sponsors’ breach of their obligations under this Agreement.

2. NATURE OF GUARANTEE . The Guarantor’s liability hereunder is absolute, unconditional, irrevocable and continuing irrespective of any modification, amendment, or waiver of or any consent to departure from the Merger Agreement that may be agreed to by Parent or Merger Sub. Without limiting the foregoing, the Guarantee d Party shall not be obligated to file any claim relating to the Obligations in the event that Parent or Merger Sub becomes subject to a bankruptcy, reorganization or similar proceeding, and the failure of the Guarantee d Party to so file shall not affect the Guarantor’s obligations hereunder. In the event that any payment from the Guarantor to the Guarantee d Party in respect of the Obligations is rescinded or must otherwise be, and is, returned to the Guarantor for any reason whatsoever, the Guarantor shall remain liable hereunder as if such payment had not been made. This Limited Guarantee is an unconditional guarantee of payment and performance and not of collectability. The Guarantor reserves the right to assert as a defense to such payment by the Guarantor under this Limited Guarantee any rights, remedies and defenses that Parent or Merger Sub may have with respect to payment of any Obligations under the Merger Agreement, other than defenses arising from the bankruptcy or insolvency of Parent or Merger Sub and other defenses expressly waived herein. This Limited Guarantee is a primary and original obligation of the Guarantor and is not merely the creation of a surety relationship, and the Guarantee d Party shall not be required to proceed against Parent or Merger Sub first before proceeding against the Guarantor.

09/29/2020 (SINA CORP)

3. Limitation of Guarantee . Anything herein or in any other Credit Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Credit Documents shall in no event exceed the amount that can be guarantee d by such Guarantor under the Bankruptcy Code or any applicable laws relating to fraudulent conveyances, fraudulent transfers or the insolvency of debtors.

04/02/2018 (BrightView Holdings, Inc.)

(b) Each party to this Guarantee acknowledges and agrees that any changes (in accordance with the provisions of the Credit Documents) in the identity of the persons from time to time comprising the Secured Parties gives rise to an equivalent change in the Secured Parties, without any further act. Upon such an occurrence, the persons then comprising the Secured Parties are vested with the rights, remedies and discretions and assume the obligations of the Secured Parties under this Guarantee . Each party to this Guarantee irrevocably authorizes the Collateral Agent to give effect to the change in Lenders contemplated in this Section12(b) by countersigning an Assignment and Acceptance.

12.11 Agents Under Security Documents and Guarantee . Each Secured Party hereby further authorizes the Administrative Agent or the Collateral Agent, as applicable, on behalf of and for the benefit of the Secured Parties, to be the agent for and representative of the Secured Parties with respect to the Collateral and the Security Documents. Subject to Section13.1, without further written consent or authorization from any Secured Party, the Administrative Agent or the Collateral Agent, as applicable, may execute any documents or instruments necessary to (a)release any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent (or any sub-agent thereof) under any Credit Document (i)upon the Final Maturity Date and the payment in full of all Obligations (except for contingent indemnification obligations in respect of which a claim has not yet been made), (ii) that is sold or to be sold or transferred as part of or in connection with any sale or other transfer permitted hereunder or under any other Credit Document to a Person that is not a Credit Party or in connection with the designation of any Restricted Subsidiary as an Unrestricted Subsidiary, (iii)if the property subject to such Lien is owned by a Credit Party, upon the release of such Credit Party from its Guarantee otherwise in accordance with the Credit Documents, (iv)as to the extent provided in the Security Documents or (v)if approved, authorized or ratified in writing in accordance with Section13.1; (b) release any Guarantor from its obligations under the Guarantee if such Person ceases to be a Restricted Subsidiary (or becomes an Excluded Subsidiary) as a result of a transaction or designation permitted hereunder; (c)subordinate any Lien on any property granted to or held by the Administrative Agent or the Collateral Agent under any Credit Document to the holder of any Lien permitted under clauses (v), (vi) (solely with respect to Section10.1(d)), (vii), and (ix)of the definition of Permitted Lien; or (d)enter into subordination or intercreditor agreements with respect to Indebtedness to the extent the Administrative Agent or the Collateral Agent is otherwise contemplated herein as being a party to such intercreditor or subordination agreement, including the Intercreditor Agreement.

4. Sponsor Guarantee . Concurrently with the execution and delivery of this commitment letter, Sponsor is executing and delivering to the Company a Sponsor Guarantee (the “Sponsor Guarantee ”).

07/25/2016 (SKULLCANDY, INC.)

(a) The Guarantor agrees that the Company may, at any time and from time to time, without notice to or further consent of the Guarantor, make any agreement with Parent or Acquisition Sub for the extension, renewal, payment, compromise, discharge, or release of any portion of the Equity Commitment, in whole or in part, or for any modification of the terms thereof or of any agreement between the Company and Parent or Acquisition Sub without in any way impairing or affecting this Guarantee . The Guarantor agrees that the obligations of the Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (i)the failure of the Company to assert any claim or demand or to enforce any right or remedy against Parent or Acquisition Sub with respect to payment of the Equity Commitment; (ii)any agreement with Parent or Acquisition Sub with respect to (A)any change in the time, place or manner of payment of any portion of the Equity Commitment, (B)any rescission, waiver, compromise, consolidation, or other amendment or modification of any of the terms or provisions of the Merger Agreement or (C)any other agreement evidencing, securing, or otherwise executed in connection with any portion of the Equity Commitment; (iii)any change in the corporate existence, structure or ownership of Parent or Acquisition Sub; (v)any insolvency, bankruptcy, reorganization, or other similar proceeding affecting Parent or Acquisition Sub; (vi)the existence of any claim, set off or other right that the Guarantor may have at any time against Parent or Acquisition Sub, whether in connection with the Equity Commitment or otherwise; or (vii)the adequacy of any other means the Company may have of obtaining payment of any portion of the Equity Commitment.

(b) To the fullest extent permitted by law, the Guarantor hereby expressly waives any and all rights or defenses arising by reason of any law that would otherwise require any election of remedies by the Company. The Guarantor waives promptness, diligence, notice of the acceptance of this Guarantee and of the Equity Commitment, presentment, demand for payment, notice of non-performance, default, dishonor and protest, notice of any Equity Commitment payment obligation incurred and any and all other notices of any kind (except for notices required to be provided to Parent and Acquisition Sub under the Merger Agreement), all defenses that may be available by virtue of any valuation, stay, moratorium law, or other similar law now or hereafter in effect, any right to require the marshalling of assets of Parent or Acquisition Sub with respect to the Equity Commitment, and all suretyship defenses generally (whether at law or in equity), other than breach by the Company of this Guarantee . The Guarantor acknowledges that, as an Affiliate of Parent and Acquisition Sub, it will receive substantial direct and indirect benefits from the transactions contemplated by the Merger Agreement and that the waivers set forth in this Guarantee are knowingly made in contemplation of such benefits and after the advice of counsel.

All obligations, liabilities and indebtedness among the Borrower and the Guarantors of any nature whatsoever and all security therefor (the Intercorporate Indebtedness) are hereby assigned and transferred to the Agent as continuing and collateral security for the Guarantors’ obligations under this Guarantee .Until notice by the Agent that the Guarantee d Obligations are due and payable, the Guarantors may receive payments in respect of the Intercorporate Indebtedness in accordance with its terms.The Guarantors shall not assign all or any part of the Intercorporate Indebtedness to any Person other than the Agent or the Lender.

03/02/2020 (Tilray, Inc.)

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Arbitration and Bank Guarantees: Evolving a New Legal Regime

by Ajay Nandalike & Swadha Sharma | Aug 7, 2022 | Practitioner | 0 comments

Section 17 of the Arbitration and Conciliation Act, 1996 was amended in the year 2015 increasing the scope of the Arbitral Tribunal to grant interim relief and reducing the power of the Court. Invocation of Bank Guarantee often requires urgent consideration and cannot wait the constitution of the Arbitral Tribunal. Hence, the affected party has to often approach the Civil Court for relief under Section 9 of the Act. Bank guarantees are perceived as instruments that not just guarantee monies or performance in a transaction but in the larger scheme of things, also fosters trust and confidence in both domestic and international trade. It’s a tripartite contract which form the very fabric of trading and other business transactions and have become an integral part of the construction industry. Bank Guarantees have become an essential intrinsic factor in Construction contracts and the disputes that arise due to their invocation or the threat of. In the current article, the authors, through case laws. focus on evolving a better legal regime to deal with bank guarantee matters under Section 17 of the Act rather than through Section 9. The debate in relation to whether the law relating to bank guarantees must apply in arbitration matters is also discussed in this article.

Introduction

Bank Guarantee is essentially a financial backstop provided by the lending establishment. It can be simply explained as a written tripartite contract granted by a bank, on behalf of its customer and in relation to its commercial contract with a third-party. By issuing this guarantee, the requisite bank takes responsibility of payment of money in case of non-performance of contractual obligations by its customer towards the third party . Primarily, two types of bank guarantees exist in the realm of law; Conditional and Unconditional guarantees. In the former case, the bank (guarantor) makes the payment only after requisite conditions for invocation are fulfilled. Whereas in the latter case, the guarantor makes the payment of the guarantee to the beneficiary on simply the invocation of the bank guarantee, devoid of any prerequisite conditions.

Law in relation to invocation of Bank Guarantees

The law insofar as restraint against invocation of bank guarantee was first laid down in UP Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. as – “commitments of banks must be honoured from interference by the courts. An irrevocable commitment either in the form of confirmed bank guarantee or irrevocable letter of credit cannot be interfered with. In order to restrain the operation either of irrevocable letter of credit or of confirmed letter of credit or of bank guarantee, there should be serious dispute and there should be good prima facie case of fraud and special equities in the form of preventing irretrievable injustice between the parties. Otherwise, the very purpose of bank guarantees would be negatived and the fabric of trading operation will get jeopardised. Upon bank guarantees revolves many of the internal trade and transactions in a country.”

This position has thereafter been followed in General Electric Technical Services Company Inc. v. M/s. Punj Sons (P) Ltd. and Another ; BSES Ltd. (Now Reliance Energy Ltd.) v. Fenner India Ltd. and Anr. ; Mahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop. Ltd and Anr . ; Adani Agri Fresh Ltd. v. Mahaboob Sharif and Ors. , among others.

Bank guarantees and letters of credit are instruments that not just guarantee monies or performance in a transaction but in the larger scheme of things, also fosters trust and confidence in both domestic and international trade. They form the very fabric of trading and other business transactions and have become an integral part of the construction industry. Therefore, from a legal and commercial point a of view, banks are traditionally allowed to honour guarantees and letters of credit without any interference from the Courts.

It is only under special circumstances that the Courts have interfered and carved out certain exceptions. The first of these arises when there is observed a clear case of fraud of which the bank has notice or a fraud in the underlying contract by the beneficiary of the bank guarantee. Such fraud must be of an egregious nature in order to vitiate the entire underlying transaction. The second exception to the general rule of non-intervention comes into play when there are special equities in favour of injunction such as when irretrievable injury or irretrievable injustice would result if such an injunction were not granted.

The fraud exception is established only if one is able to prove that the underlying contract was entered into by a way of fraud i.e., there was the commitment of misrepresentation by one of the parties to the contract which wrongfully induced the other party to enter into the said contract. Even at the stage of interim injunction, mere assertions made on oath is not considered sufficient. It must be supported by material particulars and evidence which clearly point out to the fraudulent misrepresentation that induced the establishment of such contract.

The entire basis of the law as stated above, further stresses on that banks and banking instruments must be honoured at all costs. Grant of injunction dilutes the sanctity and significance of these instruments. The Bank Guarantee is a Contract separate and distinct from the Main Contract which would contain an arbitration clause. The Courts are mindful of the fact that the Banks are third parties to the Contract and have no connection to the performance of the obligations under the Main Contract which would contain an arbitration clause and that it is open for the parties to mould the relief even if the Bank Guarantee is invoked.

Bank Guarantees and Construction Disputes

Bank guarantees are usually sought to ensure and secure the Contractor’s successful performance of his/her obligations and to safeguard the payments made to the Contractor in advance. These are to be kept viable during the pendency of the Contract and can be invoked on the instance of breach by the Contractor. Often, the threat of invocation of the bank guarantee or the invocation of bank guarantee as a pressure tactic by the Owner has resulted in several near insolvency situations to arise for the Contractor. There is no remedy readily available to be availed by the Contractor against the same; the only course of action available to him is to raise a claim in arbitration. Even on the occurrence of the event where the Contractor were to succeed in the arbitration, the recovery of the monies at a later point in time will not offset the losses caused to the Contractor in the short term.

Keeping in sight the perspective of the law established around the subject of bank guarantees, the Courts are reluctant to even consider the question of whether the invocation of bank guarantee is lawful or not under the Contract . By treating the bank guarantee to be a separate and an independent contract between the Bank and the Owner, the possible falsity of claim in the process of invocation is blatantly ignored by the Courts. This happens because of the stringent requirement of fraud which is not met in the case of breach of contract. The Courts can also take another recourse and state that even if the invocation of the bank guarantee is improper, illegal or contrary to the terms of the Main Contract, the Contractor has the remedy of claiming damages caused due to such loss.

On the other side of the coin, the threat of invocation of bank guarantee sometimes also results in stifling genuine claims of the Contractors. In some cases, the Contractor is hesitant to correspond regarding genuine claims and in other cases, they will sign a no due or a no claim certificate. This is a direct consequence of the law relating to bank guarantees.

Recently, it has been observed that the position of law is being diluted in England and in Singapore. In Simon Carves Limited v. Ensus UK Limited , the English Technology and Construction Court examined the terms of the Main Contract and on the basis of the finding that the security had become null and void once the acceptance certificate had been issued, granted an injunction against invocation. Upon review of authorities, the Court evolved the following principles:

Fraud is not the only ground upon which a call on the bond can be restrained by injunction.
There is no legal authority which permits the beneficiary to make a call on the bond if it is expressly disentitled to do so i.e., if the underlying contract, in relation which the bond has been provided by way of security clearly and expressly prevents the beneficiary party from making a demand under the security, then the Court can restrain the invocation.

Additionally, while dealing with the aspect of balance of convenience, the Court asserted that damages fail to act as an adequate remedy against unlawful invocation of bank guarantees. The Court held that ‘ the calling of the bond as in this case gives rise to a very real risk of damage to the commercial reputation, standing and creditworthiness of SCL which would be very difficult to quantify; there would be a very real risk that SCL would not pre-qualify for tenders because often tenderers have to disclose whether there have been recent calls on the bonds and if so on what grounds. ’

This risk is very real in India as well as most Notice inviting tenders prescribe a somewhat similar pre-qualification criteria wherein the Contractors have to certify if their Contracts have been terminated anywhere or if Earnest Money Deposit or other security has been forfeited in any Contract.

The Hon’ble Supreme Court in the case of Gangotri Enterprises Ltd. v. Union of India was of the view that the ‘sum due’ must be understood to be a sum which is already determined and cannot be invoked towards damages. The Supreme Court restrained the Owner from invoking the Bank Guarantee with respect to claims arising under another Contract. For the purpose of this, the Court relied on the dicta which defined the terms of the Bank guarantee which referred to ‘sum due’ and interpreted it to mean only under the Contract with respect to the bank guarantee and not of any other Contract. The Court also observed that no arbitration proceedings were initiated with respect to the claim. Hence, there was no sum due. The Supreme Court was concerned with the invocation of an unconditional guarantee by the Respondent on account of payments due with respect to a contract different than that contract under which the bank guarantee was furnished in addition to a claim of damages for the breach of contract. The Appellant had fulfilled his obligations under the contract, raised claims and the following arbitration proceedings were pending. In such circumstances, the Supreme Court applied the dicta opined in Union of India v. Raman Iron Foundry and held that damages are not a ‘sum due’ under the contract but only a claim which has to be adjudicated before it becomes a ‘sum due’. The Supreme Court therefore held that the Respondent was not entitled to invoke the bank guarantee and granted injunction restraining the same.

However, this judgment was held to be per incuriam in State of Gujarat v. Amber Builders . The basis of holding Gangotri as per incuriam was because Raman Iron Foundry had been overruled by H.M. Kamaluddin Ansari v. Union of India .

Therefore, the entire debate circles back to the contention that a bank guarantee can be invoked at any point in time, even to claim damages or amounts which are due under any other Contract. There cannot be an injunction against the Bank but if we were to file an application before the Arbitral Tribunal, would the Arbitral Tribunal be bound by the same restrictions as a Court?

Carving an Exception under Section 17 of the A & C Act

Section 17 pursuant to the 2015 Amendment to the Arbitration and Conciliation Act (hereinafter referred to as ‘A&C Act’) holds powers to secure the amount under dispute. In furtherance of this, it is possible to direct the Contractor to deposit the equivalent amount or a portion thereof or to furnish security for the amount due if the Tribunal senses the necessity. Similarly, under Section 17, whether it would be possible for the Tribunal to avoid the applicability of the general law in relation to invocation of bank guarantees is a moot question.

The Bank is not a party to the arbitration. The injunction will be to restrain the opposite party from invoking the Bank Guarantee. This injunction does not in any manner fall foul of the above stated law laid down by the Supreme Court. Injunction against invocation of the Bank Guarantee is a permissible relief under the Specific Relief Act. Even if the opposite party has invoked the Bank Guarantee, the entire amount can be attached or secured in an appropriate manner by the Tribunal in exercise of powers under Section 17. It is to be noted that the powers under Section 17 are much broader than the powers granted to a Court under Section 9 of the Act. Further, the order passed under Section 17 is appealable under Section 37 only on limited grounds which relates to jurisdiction of the Tribunal to pass such an order. This is because the grounds for challenge of an interim order cannot be beyond the grounds prescribed under Section 34 as the interim order would ultimately merge with the Final Award.

The Tribunal would first be required to decide as to whether there exists a breach or not and if there is a breach, whether the beneficiary is entitled to any amount or not. This prima-facie adjudication aids the Tribunal in arriving at the true controversy between the parties. The merits of passing such an award cannot be questioned in Section 17 or Section 37 proceeding for the reasons as mentioned above.

The rationale for evolving a separate law relating to invocation of the bank guarantee in relation to arbitration is as below: The invocation of bank guarantees before the Tribunal arrives at such a finding, amounts to pre-judging the matter by the beneficiary under the bank guarantee. Such a situation also results in multiplicity of claims inasmuch as the other party would then have to raise a claim for wrongful invocation of the bank guarantee or for recovery of the amounts realized under the bank guarantee if the tribunal finds that there is no breach of the contract as contended by the beneficiary. This can also result in multiplicity of proceedings inasmuch as a fresh claim would have to be raised etc. This would frustrate the arbitration proceedings.

This approach would have to be tweaked when it comes to performance bank guarantees which act as the Damocles Sword to compel performance from the party. The Tribunal must examine the fact if there has been an attempt to avoid performance by the party so as to create a legitimate need for invocation of the bank guarantee. If a strict approach is not adopted in this particular case, the very purpose of furnishing of bank guarantee will be lost.

Guidelines for Adjudication under Section 17

Keeping in view the broad scope of Section 17 , it would be useful for the Tribunal to have the following guidelines in mind while considering an application for an interim injunction against invocation of a bank guarantee:

a. Examine the nature of a bank guarantee

b. Conditional or unconditional – if it is a conditional bank guarantee, then it can only be invoked if the conditions mentioned in the bank guarantee are fulfilled. The adjudication of whether such conditions are fulfilled can be undertaken by the Tribunal. If it is found that prima-facie, a case is made out regarding non-fulfilment of conditions, injunction may be granted. Purpose for which it was furnished – if it is a performance security bank guarantee or mobilization advance bank guarantee, then if the party is not performing or has abandoned the contract alleging breach of conditions by the beneficiary (such as non-grant of approvals, site plans, drawings etc), then injunction must not be refused notwithstanding the defence by the party as same has to be tested before the Tribunal and it would be necessary to secure such amount during the arbitration proceedings. It would be open for the Tribunal to seek deposit of the said amount with any appropriate bank. If the Claim raised is outside the scope of the arbitration and relates to any other dispute, then the Arbitrator can restrain the invocation as it is not in terms of the reason for which the bank guarantee was furnished.

c. Adjudicator of breach for invoking bank guarantee – If the contention is raised that invocation of the bank guarantee itself is breach of the terms, then the question arises as to whether an injunction can be granted against an anticipation of breach. Injunction must be granted when a beneficiary invokes the bank guarantee making a claim for damages as such a claim is not strictly a sum due under the Contract.

d. Relatedness to the contract: Injunction must be granted if the bank guarantee in respect of one contract is sought to be invoked in respect of any sum due under some other contract. This is because Arbitrator is a creature of the Contract.

With respect to the above-mentioned detailed analysis, the authors are of the view that the Tribunal should however be mindful of its powers under Section 28 of the Act and the broader scope available under Section 17 and must do everything possible to render justice to parties.

In addition to this, the Tribunal must also be reassured by the fact that even if the aggrieved party were to prefer an appeal to Civil Court against the order under Section 17 of the Act, the Civil Court is likely to defer to the view of the Tribunal as the scope of appeal under Section 37 of the Act as against an order passed under Section 17 is extremely limited.

Furthermore, as the entire matter is before the Tribunal, it is always possible to have a more holistic view in these matters. The parties must be motivated to reduce potential claims by such adjustments and ensure that only disputed claims are adjudicated. The Tribunal must always look to suggest amicable arrangements between parties regarding invocation or adjustment of amounts.

The views and opinions expressed by the authors are personal.

About the Authors

Mr. Ajay Nandalike is a Partner at Pragati Law Chambers, Bengaluru and Counsel (Arbitration), Kabi Associates, New Delhi.

Ms. Swadha Sharma is a 3rd Year Law student, University School of Law & Legal Studies (USLLS), Guru Gobind Singh Indraprastha University (GGSIPU), New Delhi.

Editorial Team

Managing Editor: Naman Anand

Editors-in-Chief: Jhalak Srivastava & Muskaan Singh

Senior Editor: Aribba Siddique

Associate Editor: Swadha Sharma

Junior Editor: Tisa Padhy

Preferred Method of Citation

Ajay Nandalike and Swadha Sharma , “Arbitration and Bank Guarantees: Evolving a New Legal Regime” (IJPIEL, 8 August 2022)

<https://ijpiel.com/index.php/2022/08/07/arbitration-and-bank-guarantees-evolving-a-new-legal-regime/>

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Bank Guarantees as Collateral of Construction Contracts

February 10, 2021

A bank guarantee is a type of collateral in which the bank guarantees the fulfilment of an obligation by its client, i.e. the guarantee applicant, and assumes the obligation to pay if the guarantee applicant does not fulfil its contractual obligations to the guarantee beneficiary. The main purpose of issuing a bank guarantee is to provide security to the guarantee beneficiary, i.e. to regulate the relations between the parties if the obligations are not performed as stipulated by the Construction Contract.

It is interesting to note that the bank guarantee first appeared in the 1960s, specifically as a collateral for securing Construction Contracts when construction works of high value were contracted. However, today, the application of the bank guarantee is extremely wide, both in domestic and international trade. When it comes to higher value transactions, a bank guarantee will be the most common type of collateral.

Construction Contract is a type of services contract by which the contractor obliges to perform specified construction works or construct a building in accordance with a specific project, within the agreed time, while the employer undertakes to pay him a certain price. Construction Contract is one of the most complex contracts due to its economic value, the fact that the execution of construction works usually takes a longer period of time, as well as due to the complexity of the contracted works. Precisely because of these characteristics, this contract generates a high risk for both the contractor and the employer, given that in case of non-performance of the obligation of the other party, each of the parties may suffer significant damage.

The risk of the contractor is reflected in the possibility of the employer failing to fulfil its obligation, i.e. failing to pay the agreed price after the completion of the works. On the other hand, the employer is exposed to the risk of the contractor not performing the works at all or not performing them in accordance with the regulations, standards of the construction profession or the contract. These circumstances encourage the parties, when signing the contract, to envision various types of collateral in order to protect their interests as much as possible, while anticipating the amount of potential damage they would suffer in case the other party fails to fulfil the contractual obligations.

Statutory and contractual liability of a contractor

Legislators have also recognized the above stated characteristics of Construction Contracts as well as the public interest which permeates construction as a business activity, hence they prescribe special rules regarding the liability of contractors. Accordingly, Law on Obligations provides special provisions relating to the liability of the contractor. Besides the fact that the rules on defects of the work provided for the Services Contract are correspondingly applied to the defects of the construction, the Law on Obligations particularly regulates the liability of the contractor for the solidity of the building within 10 years from submission and acceptance of works.

However, the provisions of the Law on Obligations do not always provide satisfactory security to the employers, which is why they regularly require contractors to provide them with additional collateral. When it comes to the performance of construction works of higher value, the parties most often opt for a bank guarantee as a collateral, especially when it comes to securing an advance payment (where the employer is more exposed as, at the moment of payment, he receives no counteraction or benefit).

In some cases, parties will prefer to arrange a bill of exchange as a collateral, given that the issuance of a bill of exchange is more suitable when the value of contracted works is not high, because in that case it is not economically justified to require the contractor to pay a high fee for the issuance of a bank guarantee.

Types of collaterals issued for securing a Construction Contract

Depending on the risk that the employer is trying to secure, there are the following types of guarantees:

Advance payment guarantee;
Performance guarantee; and
Defect liability guarantee.

These three types of bank guarantees are most often contracted because they represent security against the risks to which the employers are most exposed, i.e. for which it has been shown that they are most often realized. Regularly, these guarantees are issued as unconditional and irrevocable first demand guarantees.

The employer may request to determine the credit rating of the bank that will issue the bank guarantee under the contract (typically, a credit rating corresponding to at least the level 3 of credit quality is required) or to choose a bank he finds acceptable. It is common for such guarantees to be issued as non-transferable, meaning that the transfer of these bank guarantees requires the consent of the parties and the issuing bank.

Advance payment guarantee

Advance payment guarantee is a bank guarantee by which the bank undertakes to pay a certain amount of money to the guarantee beneficiary, i.e. the employer, in case that the guarantee applicant, i.e. the contractor, does not fulfil the contractual obligation for which he received the advance payment. If the Construction Contract stipulates the obligation of the employer to pay a certain amount to the contractor before the commencement of the works, as an advance payment, the employer will usually want to secure such amount. This type of bank guarantee allows the employer to refund the advance payment in full in the event that the contractor does not fulfil its obligation at all, when he does not fulfil it satisfactorily, as well as when the advance payment is not used for a purpose specified by the Construction Contract.

The advance payment guarantee is usually granted for the amount of the agreed advance, but it can also be for a smaller amount. The employer will usually require that the period of validity of this guarantee be at least equal to the period specified for the performance of the agreement, i.e. until the final settlement of accounts.

Performance guarantee

By issuing a performance guarantee, the bank undertakes to pay a certain amount to the guarantee beneficiary, i.e. to the employer, if the contractor does not fulfil or improperly fulfils its contractual obligations. The guarantee amount can be determined in several ways, as follows:

a fixed amount;
a certain percentage (usually 5% or 10%) of the contracted value of works; or
by determining the upper limit or maximum amount that the bank will be obliged to pay.

The shortest period of validity agreed for a performance guarantee is until the expiry of the time for the completion of contractual obligations i.e. performance of construction works, but it is often agreed that it is valid until the expiry of a certain period after this (e.g. the guarantee is valid for 30 days after the expiry of the deadline for the completion of construction) or it can be agreed that this guarantee is valid until the contractor issues a defect liability guarantee.

Defect liability guarantee

Defect liability guarantee is a type of bank guarantee by which the bank undertakes to the guarantee beneficiary, i.e. the employer, to pay possible claims if the performed works have defects that the contractor fails not eliminate at the request of the employer. Depending on the intentions of the parties and the value of the performed works, the guarantee period can last from 12 months up to 10 years. If the agreement stipulates mandatory issuance of a defect liability guarantee, and the contractor does not provide this guarantee, the employer has the right to collect a performance guarantee. Namely, these two types of bank guarantees are linked because it is usually agreed that the employer returns the performance guarantee to the contractor only after the contractor submits a defect liability guarantee during the guarantee period.

The guarantee amount is usually agreed in a certain percentage (typically 5% or 10%) of the agreed value of the works.

Having in mind the above, bank guarantee is always one of the most desirable and safest collaterals for the employer. Bank guarantees enable the employer a quick, easy and safe collection when the contractor does not fulfil the obligations he undertook under the Construction Contract. On the other hand, for the contractor, bank guarantees are an expensive collateral because of the price he has to pay to the issuing bank, which amounts to about 2-3% of the approved amount of the guarantee on an annual basis. However, for employers, no bank guarantee is a deal breaker when it comes to contracting performance of high value works.

FOR MORE INFO CONTACT:

Dušan Vukadin

Amina Kajević

advance payment guarantee , Bank guarantee , bank guarantees , Collateral Construction contracts , collaterals , construction contracts , defect liability guarantee , performance guarantee

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Bank guarantee

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Bank Guarantees In India

Contributor.

In the modern business environment, characterised by spatial distance and inability of the parties to a commercial transaction in performing a realistic assessment of the creditworthiness of a business partner, there is often a need for the use of instruments that secure payments. 1 “ Bank Guarantee ” is a commercial instrument that has emerged as a contemporary solution for securing payment of money in a commercial dealing.

The Indian Contract Act (ICA), 1872 defines a “contract of guarantee” as a contract to perform the promise, or discharge the liability, of a third person in case of his default. 2 Similarly, bank guarantee (hereinafter referred to as “ BG ”) can be defined as a unilateral legal contract in which a bank (guarantor) undertakes an obligation to guarantee to pay the beneficiary a certain amount of money specified in the guarantee if the debtor from the original contract does not fulfil his contractual obligations.

An Independent Contract

As per law a BG is an “independent contract” between the bank and the beneficiary, separate from the underlying contract between the beneficiary and the person (debtor) at whose instance the BG is given. 3 Thus, two contracts and three parties come into existence when a contract is entered into which provides for BGs being furnished. 4 The bank has to honour its undertaking when the guarantee is invoked, without reference to the party on whose behalf it has been issued, notwithstanding any disputes or disagreements that might have arisen in the mean time between the debtor and the beneficiary. 5 The doctrinal basis for this principle is that a BG is intended to secure the beneficiary by allowing it to immediately claim from a party in terms of the BG and therefore it cannot be qualified by the contract on performance of the obligations.

Types of Bank Guarantee

According to specific purposes, BGs are categorized into various types. Some of them are as follows.

On the basis of issuance:

A direct BG is one where a bank is asked to provide a guarantee by its account holder, in favour of the beneficiary. Direct BG does not rely on the existence, validity and enforceability of the main obligation.

Indirect BG

When a second bank issues a BG in return for an already issued BG, it is termed as an Indirect BG. In such scenarios, if the second bank suffers losses when a claim is made against a guarantee, the issuing bank will make sure that it compensates all the losses.

On the basis of the conditions specified in the guarantee:

Unconditional BG

Unconditional BGs ensure the payment to the beneficiary “unconditionally and irrevocably” on beneficiary's first demand upon invoking the guarantee. 6 Thus, the beneficiary becomes the sole judge of the performance of the contract and the bank cannot question the judgment or ask question/evidence in that regard. The demand of the beneficiary shall be final and conclusive in that regard.

Conditional BG

Where the BG has certain conditions, which need to be fulfilled in order for the absolute invocation of guarantee by the beneficiary, such BGs are termed as conditional BGs. The language of the guarantee plays a vital role in determining which kind of guarantee is it. Some guarantees though mention the words “unconditionally and irrevocably,” they qualify such expressions with a condition or a situation upon occurring of which the underlying guarantee becomes encashable. In such circumstance, the BG in question would be categorised as a conditional BG. 7

On the basis of the type of performance by the bank as per the guarantee:

Financial BG

A financial BG assures that money will be repaid if the party ( debtor) does not complete a particular project or operation entirely. According to the financial guarantee agreement, when there is a delay in the completion of a project, the bank will make the payment.

Advance Payment BG

This guarantee signifies an obligation on the part of the bank to return advance payment if, after receiving an advance, the party ( debtor) does not perform its contractual commitments.

Deferred Payment BG

Deferred payment BG is offered to the beneficiary for a deferred period or for a certain time period. Under this guarantee, payment is usually made in instalments by the bank for failure in the completion of contractual obligations by the debtor.

Performance/Contract Execution BG

This guarantee assures timely delivery of goods or performance of services according to a contract. Monetary compensation of will be made by the bank in case of any delay in performance of services or operation of the contract.

Invocation of Bank Guarantees

The beneficiary needs to invoke the BG on or before the expiry date of the guarantee, and in accordance with the contract/terms of the guarantee. 8 The issuing bank is bound to observe and honour the terms of the guarantee and therefore, the beneficiary of a BG cannot be restrained from invoking the BG. 9 If a bank does not receive any claim on or before the validity period mentioned in the terms of the guarantee, the bank will be discharged from its liability.

It is pertinent to note that Unconditional BGs ensure the payment to the beneficiary “unconditionally and irrevocably” on beneficiary's first demand upon invoking the guarantee, 10 while in case of Conditional BGs, the beneficiary does not have an unfettered right to invoke that guarantee and demand immediate payment thereof. 11 BGs can be invoked by the beneficiary irrespective of pending disputes between him and the debtor. 12 Moreover, a BG constitutes a bargain between the two parties, in which the banker creditor is unconditionally required to pay the amount in question. 13

Limitation Period for Invocation of Bank Guarantees

Under the Indian Limitation Act, 1963, the period for invoking the BG is 30 years, if the beneficiary is government Department or Municipal Corporation and 3 years in all other cases. Prior to the amendment made by the Contract (Amendment) Act, 1996 in the ICA, 14 BGs used to have a clause that “…unless the claim under this bank guarantee is made within six months from the expiry of the bank guarantees, the liability of the bank will be extinguished under the guarantee…”. After the amendment, if a beneficiary of a BG invokes the guarantee with the claim period, for a default committed by the debtor during the validity period, then the bank will not make payment, the beneficiary may file suit against the bank within the period mentioned in the Limitation Act, 1963 and any clause restricting the bank's liability will be illegal and void ab initio. Therefore, the bank should obtain the bank guarantee duly cancelled by the beneficiary or a certificate from the beneficiary that there is no claim under the guarantee. If the guarantee, duly cancelled or certificate is not obtained from the beneficiary, the bank should retain the security of the debtor and cash margin till the expiry of the limitation period under the Limitation Act, 1963. 15

Stay on Invocation of Bank Guarantees

There are instances when giving absolute discretion to someone can lead to misuse of power resulting in corrupt and illicit practices. For instance, when a a beneficiary is aware of his faulty goods and is not entitled to payment, but still invokes BG with the mala-fide intentions for monetary gains is a case in point. Therefore, in order to define an ambit of independence and the scope of Unconditional BGs, it is essential to have certain parameters towards invocation of BGs. The courts 16 in India have narrowed down two exceptions where injunction on invocation of unconditional BG can be granted:

Fraud 17 of an egregious nature as to vitiate the entire underlying transaction, of which the bank has notice.
Special equities 18 in the form of preventing irretrievable injustice 19 between the parties.

Egregious Fraud

An injunction against encashment of BG can be issued when there is clear fraud on the part of a beneficiary, which the bank notices. 20 The fraud must be as to vitiate the whole transaction 21 and vague and indefinite allegations made do not satisfy the requirement in law constituting any fraud much less than the fraud of an egregious nature. 22 It is apposite to state here that a demand by the beneficiary under the BG may become fraudulent not because of any fraud committed by the beneficiary while executing the underlying contract but it may become so because of subsequent events or circumstances. 23

Special Equities in the Form of Preventing Irretrievable Injustice

“Special Equities ”has been considered as a prima facie ground that would prevent irretrievable injustice between the parties. 24 While the courts have not ventured to define or even describe the term “Special Equities”, 25 every case has to be decided with reference to the facts of the case involved therein. 26 However, special equities might entitle the party to an injunction restraining the performance of BG. 27 The courts have often opined that allowing encashment of an unconditional BG would result in irretrievable harm or injustice to one of the parties concerned; 28 however, to avail of the exception of irreparable harm or injury, the party seeking relief would necessarily have to show exceptional circumstances, which would make it impossible for the guarantor to reimburse himself in the event of succeeding in the main dispute. In other words, a case of irretrievable injury and/or irreparable harm would have to be made out clearly. 29

Key Guidelines for Bank Guarantee by the Reserve Bank of India (RBI)

The RBI has, over the years, developed rules and regulations around BGs, in order to befit the contemporary requirements of the business environment. Some of the key guidelines 30 are as follows:

No BG should normally have a maturity of more than 10 years.

Unsecure Guarantees

The restriction of 20% on unsecured guarantees has been withdrawn (w.e.f.17.6.2004) by the RBI and bank boards have been given the freedom to fix their own policies on their unsecured exposures.

Precautions for averting frauds

Banks should refrain from issuing guarantees on behalf of customers who do not enjoy credit facilities with them. Moreover, banks should, while forwarding guarantees, caution the beneficiaries that they should, verify the genuineness of the guarantee with the issuing bank.

Inter-institutional Guarantees

Banks may issue guarantees favouring other banks/ financial institutions/other lending agencies for the loans extended by the latter, subject to the condition that the guaranteeing bank should assume a funded exposure of at least 10% of the exposure guaranteed.

Payment of Invoked Guarantee

Where guarantees are invoked, payment should be made to the beneficiaries without delay and demur.

BGs have proved to be a huge advantage in a modern business setting. BGs are individual contracts between the bank and the creditor, and are independent of the underlying contract between the beneficiary and the person at whose instance the bank guarantee is given. However, courts may analyse facts of a matter and may intervene and grant stay on invocation of such bank guarantees under certain conditions (Egregious Fraud, Irretrievable Harm/Injustice and Special Equities); this is done to prevent miscarriage of justice or to not let one party take advantage of a legal loophole.

1 Mirjana Knezevic and Aleksandar Lukic (2016). The importance of bank guarantees in modern business (business environment in Serbia). Investment Management and Financial Innovations , 13(3-1), 215-221.

2 The Indian Contract Act 1872, Section 126.

3 Delhi Lotteries v. Rajesh Aggarwal, AIR 1998 Del 332.

4 Mohd Yasin Wani & Rais Ahmad Qazi, “A Legal Perspective of Bank Guarantee System in India” available at: ijrcm.org.in/download.php?name=ijrcm-1-vol-3 (visited on June 20, 2021).

6 Vinitec Electronics Pvt. Ltd. v. HCL Infosystems Ltd., (2008) 1 SCC 544; see also Adani Agri Fresh Ltd. v. Mahaboob Sharif (2016) 14 SCC 517; see alsoMahatma Gandhi Sahakra Sakkare Karkhane v. National Heavy Engg. Coop. Ltd. and Ors. AIR 2007 SC 2716; see alsoGujarat Maritime Board v. L&T Infrastructure Development Projects Ltd., (2016) 10 SCC 46.

7 Hindustan Construction Co. Ltd. v. State of Bihar and Ors. (1999) 8 SCC 436; see also Jacsons Veeners & Panels Pvt. Ltd. v. State Bank of Travancore & Anr . , (2009) SCC OnLine Ker 4210.

9 Hugglunds Drives AB v. National Heavy Engineering Co-Op. Ltd., AIR 2002 Bom 305.

10 Supra note 7.

11 Supra note 8.

12 Bank of Baroda v. Ruby Sales Corporation Agency, AIR 2001 Del 285.

13 UP State Sugar Corporation v. Sumac International Ltd., (1997) 1 SCC 568.

14 The Indian Contract Act 1872, Section 20.

15 Supra note 5.

16 Hindustan Steelworks Corp. Ltd. v. Tarapore and Co., (1996) 5 SCC 34.; see also Svenska Handelsbanken v. M/s. Indian Charge Chrome, (1994) 1 SCC 502.

17 UPCOF v. Singh Consultants and Engineers (1988) 1 SCC 174.

18 Standard Chartered Bank v. Heavy Engineering Co. and Anr., 2019 SCC OnLine SC 1638; see also Texmaco Limited v. State Bank of India, AIR 1979 Cal 44.

19 Himadri Chemicals Industries Ltd. v. Coal Tar Refining Co., (2007) 8 SCC 110.

20 Supra note 14.

21 Supra note 17; see alsoRigoss Exports International (P) Ltd. v. Tartan Infomark Ltd (AIR 2001 Delhi 285).

22 Supra note 7.

23 Mercator Oil & Gas Limited v Oil & Natural Gas Corporation Limited, 2019 SCC OnLine Bom 1378.

24 Supra note 18.

25 Cosy (India) Ltd. v. Vijaya Bank and Ors, (1991) 1 Cal LJ 39.

26 Gangotri Enterprises Ltd v. U.O.I., (2016) 11 SCC 720.

27 Supra note 19.

28 Supra note 20.

29 Supra note 14.

30 Reserve Bank of India,Master Circular - Guarantees and Co-acceptances, RBI/2009-10/70 DBOD. No. Dir. BC. 14 /13.03.00/2009-10 (2009) https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=5130 (last accessed on June 24, 2021).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Bank Guarantee : Uses, Eligibility & Process, Advantages

Updated on : Apr 1st, 2021

A guarantee means giving something as security. A bank guarantee is when a bank offers surety and guarantees for different business obligation on behalf of their customers within certain regulations. The lending institutions provide a bank guarantee which acts as a promises to cover the loss of the customer if he/she defaults on a loan. It is an assurance to a beneficiary that the financial institution will uphold the contract between the customer and third party if the customer is unable to do so.

Meaning of Bank Guarantee

Bank Guarantee a promise made by the bank to any third person to undertake the payment risk on behalf of its customers. Bank guarantee is given on a contractual obligation between the bank and its customers. Such guarantees are widely used in business and personal transactions to protect the third party from financial losses. This guarantee helps a company to purchase things that it ordinarily could not, thus helping business grow and promoting entrepreneurial activity.

For Example- Xyz company is a newly established textile factory that wants to purchase Rs.1 crore fabric raw materials. The raw material vendor requires Xyz company to provide a bank guarantee to cover payments before they ship the raw material to Xyz company. Xyz company requests and obtains a guarantee from the lending institution keeping its cash accounts. The bank essentially cosigns the purchase contract with the vendor. If Xyz company defaults in payment, the vendor can recover it from the bank.

Similarly, a large manufacturer of furniture wishes to enter into a contract with a small woodshop vendor. The large manufacturer will require the small vendor to provide a bank guarantee before entering into a contract for Rs.50 lakh worth of wood material. In this case, the large manufacturer is the beneficiary who requires a guarantee before entering into a contract. If the small vendor is unable to deliver the wood material, the large manufacturer of furniture can claim the losses from the bank.

Sample Bank Guarantee for reference: https://www.nlcindia.com/tenders/format_bgp.pdf

Uses of Bank Guarantee

When large companies purchases from small vendors, they generally require the vendors to provide guarantee certificate from banks before providing such business opportunities.
Predominantly used in the purchase and sale of goods on credit basis, where the seller is assured of payment from the bank in case of default by the buyer.
Helps in certifying the credibility of individuals, which in turn, enables them in obtaining loans and also assists in business activities.

Though there are lots of uses from a bank guarantee for the applicant, the bank should process the same only after ensuring the financial stability of the applicant/business. The risk involved in providing such a guarantee must be analysed thoroughly by the bank.

Advantages and Disadvantages of Bank Guarantees

Bank guarantee has its own advantages and disadvantages. The advantages are:

Bank guarantee reduces the financial risk involved in the business transaction.
Due to low risk, it encourages the seller/beneficiaries to expand their business on a credit basis.
Banks generally charge low fees for guarantees, which is beneficial to even small-scale business.
When banks analyse and certify the financial stability of the business, its credibility increases and this, in turn, increase business opportunities.
Mostly, the guarantee requires fewer documents and is processed quickly by the banks (if all the documents are submitted).

On the flip side, there are some disadvantages such as:

Sometimes, the banks are so rigid in assessing the financial position of the business. This makes the process complicated and time-consuming.
With the strict assessment of banks, it is very difficult to obtain a bank guarantee by loss-making entities.
For certain guarantees involving high-value or high-risk transactions, banks will require collateral security to process the guarantee.

Types of Bank Guarantee

There are two major types of bank guarantee used in businesses, which are as follows:

Financial Guarantee

These guarantees are generally issued in lieu of security deposits. Some contracts may require a financial commitment from the buyer such as a security deposit. In such cases, instead of depositing the money, the buyer can provide the seller with a financial bank guarantee using which the seller can be compensated in case of any loss.

Performance Guarantee

These guarantees are issued for the performance of a contract or an obligation. In case, there is a default in the performance, non-performance or short performance of a contract, the beneficiary’s loss will be made good by the bank.

For example, A enters into a contract with B for completion of a certain project and the contract is supported by a bank guarantee. If A does not complete the project on time and does not compensate B for the loss, B can claim the loss from the bank with the bank guarantee provided.

Bank Guarantee (BG) Eligibility and Process

Any person who has a good financial record is eligible to apply for BG. BG can be applied by a business in his bank or any other bank offering such services. Before approving the BG, the bank will analyse the previous banking history, creditworthiness, liquidity, CRISIL , and CIBIL rating of the applicant.

The bank would also examine the BG period, value, beneficiary details, and currency as required for the approval. In certain cases, banks will require security to be provided by the applicant to cover the BG value. Once the banking officials are satisfied with all the criteria, they will provide the necessary approvals required for the BG processing.

Bank Guarantee Charges

Generally, BG charges are based on the risk assumed by the bank in each transaction. For example, a financial BG is considered to assume more risk than a performance BG. Hence, the fee for financial BG will be higher than the fee charged for performance BG. Based on the type of the BG, fees are generally charged on a quarterly basis on the BG value of 0.75% or 0.50% during the BG validity period.

Apart from this, the bank may also charge the application processing fee, documentation fee, and handling fee. In some cases, security is required by the bank from its applicant, which is generally 100% of the BG value. In certain cases, collateral security or cash margin may also be accepted by the issuing bank.

Difference between BG & Letter of Credit (LOC)

LOC is a financial document which imposes an obligation on the bank to make payment to the beneficiary on completion of certain services as required by the applicant. LOC is issued by the bank when the buyer requests his bank to make payment to the seller on the receipt of certain goods or services. That is, when the buyer runs into cash flow difficulties or similar situations and thus cannot make immediate payment to the seller, he will approach his bank to make the payment to the seller on submission of certain documents.

The bank will later recover the amount paid from the buyer along with the required charges. On the other hand, under BG, the bank is required to make payment to the third-party only if the applicant fails to make the payment to the third-party or does not fulfil the required obligations under the contract.

A BG is essentially used to ensure a seller from loss or damage due to the non-performance by the other party in a contract. LOC is generally misunderstood as BG since they share some common characteristics. They both play a significant role in trade financing when the parties to the transactions don’t have established the business relationships. However, there are a lot of differences between LOC and BG.

Major differences between Letter of Credit (LOC) and Bank Guarantee (BG) are as follows:

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