Draft of Bank Guarantee

Learning Goal: I’m working on a international law question and need an explanation and answer to help me learn.

Class Exercise:

You represent German supermarket chain, GeStore (Buyer). Buyer is entering into apples sales agreement with the Georgian apples producer, GeoApple LLC (Seller). Parties agreed on sale of 5 tones of Georgian red apples in 5 shipments for USD 10,000 per tone, total of USD 50,000.

The Buyer has never purchased apples from Georgia. It does not have any past experience with dealing with GeoApple LLC either. For this purpose, Buyer needs some kind of guarantee of quality of goods. Parties agreed that in case of apples sold by the Seller to the Buyer do not conform with the contractual requirements, the Seller will have to pay the Buyer penalty in the amount of 20% of the total purchase price (the Penalty).

The Buyer has requested the seller provision of the bank guarantee on the amount of Penalty. The Buyer asked you, as his counsel, to draft the bank guarantee in accordance with the ICC URDG 758. Buyer will send draft prepared by you to the Seller for execution. The Parties agreed that the bank guarantee should be issued by Bank of Georgia JSC, which is the Seller’s bank. The Buyer did not request any counter-guarantee since it trusts the Bank of Georgia JSC as internally reputable commercial bank.

You are required to draft the Bank Guarantee form considering the interests of your client, GeStore LLC, the Buyer.

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