Encashment of such guarantee

In cases of construction or service contracts, advance paid to the contractor was known as the "mobilization advance"; and normally as a pre-condition for release of the advance to the contractor, the latter was required to furnish a guarantee, either from a bank or an insurance company

Two separate and distinct agreements/contracts existed in such cases, which were firstly, the underlying agreement and secondly, the bank or insurance guarantee

On completion of the agreed work, the guarantee was to be released, or it may be enforced/encashed if a default was committed

Depending upon the intention of the parties, a bank or insurance guarantee may be either conditional or unconditional

Conditional guarantee could only be invoked on fulfilment of the condition(s) stipulated therein; for example proof of breach or default

In case of unconditional guarantee, the guarantor, that was either the bank or an insurance company, was under an obligation to honour its commitment by making payment on demand; regardless of any dispute between the parties arising out of or connected with underlying agreement/contract

"Mobilization guarantee" was an independent contact, and terms and conditions stipulated therein determined its nature and consequent effect

Like any other contract, a guarantee came into existence as a legally binding agreement between two or more willing parties, and therefore, the same had to be read and interpreted independent of any other agreement or the underlying agreement pursuant to which it had been furnished.

In cases of construction or service contracts, advance paid to the contractor was known as the "mobilization advance"; and normally as a pre-condition for release of the advance to the contractor, the latter was required to furnish a guarantee, either from a bank or an insurance company

Two separate and distinct agreements/contracts existed in such cases, which were firstly, the underlying agreement and secondly, the bank or insurance guarantee

On completion of the agreed work, the guarantee was to be released, or it may be enforced/encashed if a default was committed

Depending upon the intention of the parties, a bank or insurance guarantee may be either conditional or unconditional

Conditional guarantee could only be invoked on fulfilment of the condition(s) stipulated therein; for example proof of breach or default

In case of unconditional guarantee, the guarantor, that was either the bank or an insurance company, was under an obligation to honour its commitment by making payment on demand; regardless of any dispute between the parties arising out of or connected with underlying agreement/contract

"Mobilization guarantee" was an independent contact, and terms and conditions stipulated therein determined its nature and consequent effect

Like any other contract, a guarantee came into existence as a legally binding agreement between two or more willing parties, and therefore, the same had to be read and interpreted independent of any other agreement or the underlying agreement pursuant to which it had been furnished.