The Uniform Rules for Demand Guarantees (URDG – 758) to promote security and confidence in commercial transactions in sub-Saharan Africa

URDG – 758: What is it?
The objectives of URDG – 758
How does the URDG – 758 work?
URDG – 758 in African markets
What to remember from URDG – 758

The Uniform Rules for Demand Guarantees (URDG) are a set of international standards that have been developed to govern demand guarantees in international commercial transactions. These rules are also known as URDG 758, as they were adopted by the International Chamber of Commerce in 2010 and bear the number 758.
As a reminder, a guarantee on demand is a written commitment made by a bank or a guarantee issuer to pay a sum of money to the beneficiary of the guarantee, at the request of the latter. In other words, demand guarantee is a form of bank guarantee that assures the beneficiary that the obligations of the guarantee issuer will be met.

In the context of an international commercial transaction, the demand guarantee can be used to protect the buyer or the seller against the risks associated with non-performance or improper performance of the contract. For example, a buyer can request a guarantee on demand from a seller to ensure that the latter will respect the terms of the sales contract. If the seller fails to meet his contractual obligations, the buyer can then demand payment of the sum guaranteed by the bank or the issuer of the guarantee.

Demand guarantee is therefore an important form of financial security for parties involved in an international business transaction, and it is governed by uniform rules such as URDG -758 to facilitate its use in international transactions.

The objectives of URDG-758 are multiple and aim to govern guarantees on demand in international commercial transactions. Here are the main objectives of this uniform rule:

1. Standardize the rules governing on-demand guarantees: URDG-758 aims to promote uniformity and consistency in the rules governing on-demand guarantees, in order to reduce the risks associated with international commercial transactions.
2. Protect the interests of the parties involved: URDG-758 is intended to protect the interests of all parties involved in a demand guarantee transaction, including the beneficiary of the guarantee, the issuer of the guarantee and the originator.
3. To promote the security of international commercial transactions: URDG-758 aims to ensure the security of international commercial transactions by setting out the rights and obligations of the parties involved in a transaction of guarantee on demand.
4. Promoting confidence in international commercial transactions: URDG-758 aims to promote confidence in international commercial transactions by providing a clear legal framework for the use and interpretation of guarantees on demand.
5. Encourage prompt and effective resolution of disputes: URDG-758 provides procedural rules for the resolution of disputes related to warranties on request, in order to encourage prompt and effective resolution of disputes that may arise in the context of a warranty transaction on request.

URDG-758 sets out uniform rules for demand guarantees in international commercial transactions. Here’s how these rules work:

1. Conditions for on-demand warranty claim: URDG-758 requires that the terms of the on-demand warranty be clearly stated and that the warranty recipient provide a written request, consistent with the terms and conditions of the warranty, in order to invoke warranty.
2. Obligations of the issuer of the guarantee: The issuer of the guarantee must honor the guarantee on demand if the request complies with the terms and conditions of the guarantee.
3. Duration of on-demand warranty: URDG-758 also sets out the duration of the on-demand warranty, which should be clearly specified in the warranty.
4. Dispute Resolution: URDG-758 provides procedural rules for the resolution of warranty disputes upon request. The parties are encouraged to first seek an amicable resolution of the dispute, but if this is not possible, they may resort to mediation or arbitration in accordance with the rules of procedure set out in URDG-758.
5. Interpretation of On-Demand Warranty: URDG-758 provides interpretation rules for on-demand warranties to ensure uniform and consistent interpretation of warranty terms and conditions.

URDG-758 is useful in African markets to promote security and confidence in international business transactions involving guarantees on demand. Here are some key points to consider:

• URDG-758 is an internationally recognized legal instrument for on-demand guarantees in international commercial transactions. African companies wishing to engage in transactions of this type can therefore benefit from the use of these rules.
• The uniform rules provided by URDG-758 can help minimize risk for parties involved in a demand guarantee transaction, which is particularly important for African businesses looking to expand into international markets.
• By providing uniform rules of interpretation for on-demand guarantees, URDG-758 can help avoid misunderstandings between parties, which is particularly important in cross-border transactions where differences in languages, cultures and business practices can be important.
• The rules of procedure for the resolution of disputes provided by URDG-758 can help ensure prompt and efficient resolution of disputes, which can be important in African markets where legal proceedings can be lengthy and costly.

In sum, URDG-758 is an important legal instrument to facilitate international commercial transactions involving guarantees on demand. It provides a clear and uniform legal framework for these transactions, thus helping to enhance security and confidence in international trade.