Demand Guarantees Legal System

In the early 1970's,Demand Guarantee originated first in the Middle East. It was a new type of Independent Guarantee that developed from the innovation and consummation of the traditional accessory Guarantee. On the moment of its creation, the Demand Guarantee was ardently welcomed by the business circle and banking circle due to its high independence, strong payment safeguard, risk balancing and dealing facility. Also, it kept up with the pace of the international trade and economics, satisfying the requirement of each parties of the business.The remarkable character of Demand Guarantee is that it stands independently without the influence of the modification and nullity of the basic contract. The guarantor's obligation will not be decided by the performance of the underlying contract. As long as the beneficiary present the demand announcement or breach declaration and the requested bill of documents, the guarantor shall make the payment. Therefore, it breaks the traditional accessory guarantee's subordination and excludes the demurring rights of the guarantor based on the underlying contract. It provides a strongest and easiest type of guarantee to safeguard the performance the contract. This paper will be divided into five parts except the preface and conclusion.The first part is summarization that briefly introduced the origin, definition and judgment of the Demand Guarantee. On the other hand, it illuminates the economic analysis and evaluation direction. The second part is about the international uniform law of Demand Guarantee, which mainly introduced the "Uniform Rules for Demand Guarantee"(URDG) and "United Nations Convention on Independent Guarantee and Standby Letter of Credit". The third part and forth part are the main body of this paper. The third part includes the legal attribute and characters of Demand Guarantee, which points out the double legal attributes and later focuses on the primary character of independence, absolution, Promissory Estoppel and trend of documentation. The forth part focuses on several core legal problems of the legal system of Demand Guarantee including the legal relationship of the parties, the payment mechanism, the fraud and improper demand. The fifth part is about the legislation and practice of Demand Guarantee in China. The writer tried to find the space of validity of Demand Guarantee in the current Chinese legislation, suggesting the early joining of the Convention in accordance with the international customs to direct and administrate the practice of Demand Guarantee in our country.