Our case update on a simplified approach advanced by the English Court of Appeal to distinguish between a bond and a guarantee, has been picked up by Singapore Law Watch (“SLW“). Our SLW Commentary can be found here.

The SLW Commentary examines the decision of Wuhan Guoyu Logistics Group Co Ltd & Anor v Emporiki Bank of Greece SA, [2012] EWCA Civ 1629, where the Court of Appeal sought to re-establish a simpler and more streamlined test for determining whether a payment obligation (a so-called “Payment Guarantee“) was more in nature of a proper guarantee or that of an on demand bond. The difficulty as in all such cases was that different factors in the payment obligation pointed in different directions i.e. some pointed in favour of a reading that it was a guarantee while others in favour of a reading that it was an on demand bond.

The Court of Appeal felt the need to reassert the simplified approach due to the English High Courts having had to undertake an exhausting review of the case law (i.e. in the vicinity of 20 authorities) for what the Court of Appeal felt ought to be a “comparatively simply question of construction“. In this respect, it was hoped that this simplified approach would lend “assistance” to commercial parties who needed to determine their obligations without needing recourse to the courts.