Certified Real Estate Brokerage Manager (CRB)

Correct: The immediate priority is understanding the specific operational differences between the rules. ISP98 (International Standby Practices) and URDG 758 (Uniform Rules for Demand Guarantees) both support independent undertakings but have different defaults. For example, URDG 758 Article 15(a) requires a supporting statement of breach in a demand unless the guarantee says otherwise, whereas ISP98 does not have this as a default requirement unless specified. Furthermore, examination periods and notice requirements differ between the two sets of rules.

Incorrect: Option B is incorrect because ISP98 and URDG 758 have different examination periods (e.g., ‘reasonable time not to exceed 7 business days’ in ISP98 vs. ‘five business days’ in URDG 758). Option C is incorrect because UCP 600 is designed for commercial letters of credit and lacks specific provisions for the default/non-performance nature of standbys and guarantees. Option D is incorrect because it violates the independence principle, which dictates that the guarantee is separate from the underlying contract and the guarantor should not look to the underlying contract to resolve ambiguities.

Takeaway: While Standby Letters of Credit and Demand Guarantees are functionally similar, the choice between ISP98 and URDG 758 introduces significant differences in document examination timelines and mandatory demand content.

Correct: Under URDG 758 Article 5, demand guarantees are independent of the underlying contract. Article 6 further specifies that guarantors deal with documents and not with the goods, services, or performance to which the documents may relate. Since the demand is documentarily compliant with the terms of the guarantee, the guarantor is obligated to pay, regardless of the applicant’s claims or external evidence regarding the underlying contract’s performance.

Incorrect: Option B is incorrect because the guarantor is not permitted to consider documents or evidence outside of the guarantee’s specific requirements to determine compliance. Option C is incorrect because URDG 758 does not provide for a mandatory suspension of payment due to a dispute between the applicant and beneficiary unless a court order is obtained. Option D is incorrect because the guarantor cannot unilaterally impose new documentary requirements (like additional proof of breach) that were not specified in the original guarantee at the time of issuance.

Takeaway: The independence principle dictates that a guarantor’s obligation to pay is based solely on a complying documentary presentation, irrespective of the actual status of the underlying contract.

Correct: According to URDG 758, a confirmation represents a separate and independent undertaking by the confirming bank. This undertaking is in addition to the guarantor’s undertaking. Once a bank confirms a guarantee, it is bound to pay a complying demand as if it were the guarantor. This obligation is autonomous and not contingent upon the guarantor’s ability or willingness to reimburse the confirming bank later.

Incorrect: The suggestion that liability is secondary or requires a notice of dishonor from the guarantor is incorrect because demand guarantees and their confirmations are independent, not accessory (suretyship) obligations. The idea that the bank acts only as an agent or is limited to pre-positioned funds ignores the fundamental principle of the confirming bank’s own credit risk assumption. Describing the role as merely administrative or limited to signature verification describes an advising bank, not a confirming bank.

Takeaway: A confirming bank assumes an independent, primary payment obligation to the beneficiary that is separate from the guarantor’s undertaking under URDG 758 rules.

Correct: According to Article 33 of URDG 758, a guarantee is transferable only if it specifically states it is ‘transferable.’ However, even when a guarantee is transferable, the guarantor is not obliged to give effect to a transfer request except to the extent and in the manner expressly consented to by that guarantor. This ensures the guarantor retains control over which parties it enters into a direct undertaking with, regardless of the initial ‘transferable’ designation.

Incorrect: The second option is incorrect because the ‘transferable’ designation is a necessary condition but does not create an absolute mandate for the guarantor to accept any specific transfer. The third option is incorrect because it confuses the transfer of the guarantee (the right to demand) with the assignment of proceeds; the right to demand always requires guarantor consent under URDG. The fourth option is incorrect because while an applicant’s involvement or the underlying contract’s status may be relevant, URDG 758 specifically protects the guarantor’s right to refuse consent to the transfer of the guarantee itself.

Takeaway: Under URDG 758, the ‘transferable’ status of a guarantee is a prerequisite for transfer, but the guarantor’s express consent to the specific extent and manner of the transfer remains mandatory.

Correct: According to URDG 758 Article 5, a guarantee is by its nature separate from the underlying relationship and the application. The guarantor’s obligation to pay is not subject to claims or defenses arising from any relationship other than that between the guarantor and the beneficiary. Therefore, if the demand is a complying presentation on its face, the bank must pay regardless of the underlying contract dispute.

Incorrect: Requiring third-party evidence of non-breach is incorrect because the guarantor’s role is limited to the examination of documents specified in the guarantee, not investigating the underlying contract. Seeking an injunction is a legal remedy usually reserved for cases of established fraud, not standard contractual disputes. Deferring payment based on an applicant’s indemnity is incorrect as it would violate the bank’s independent and primary obligation to the beneficiary under the URDG framework.

Takeaway: The independence principle ensures that the guarantor’s obligation to pay is determined solely by the presentation of complying documents, independent of any disputes in the underlying contract.

Correct: According to Article 33 of URDG 758, while a beneficiary may assign any proceeds to which it may be or may become entitled under the guarantee, the guarantor is not obliged to pay the assignee unless the guarantor has agreed to do so. This protects the guarantor from being forced into a relationship with a third party without its consent, maintaining the autonomy of the bank’s obligations.

Incorrect: The option suggesting the notice is automatically binding is incorrect because URDG 758 requires the guarantor’s agreement to pay the assignee. The option regarding escrow is incorrect as it introduces a procedural requirement not found in the URDG framework. The option regarding the transfer of the guarantee is incorrect because an assignment of proceeds is distinct from a transfer; in an assignment, the right to demand payment remains with the original beneficiary, whereas a transfer moves the right to demand to a new beneficiary.

Takeaway: Under URDG 758, an assignment of proceeds only obligates the guarantor to pay the assignee if the guarantor has expressly agreed to the assignment.

Correct: Under URDG 758, there is a fundamental distinction between the transfer of a guarantee (Article 33) and the assignment of proceeds (Article 34). A transfer of a guarantee actually changes the beneficiary, allowing the new beneficiary to make a demand. This requires the guarantee to be ‘transferable’ and the guarantor’s consent. Conversely, an assignment of proceeds only gives the assignee the right to the money after a valid demand is made by the original beneficiary. The assignee has no right to sign or submit the demand themselves.

Incorrect: The claim that an assignment of proceeds allows the assignee to sign demands is incorrect because assignment only transfers the right to the payout, not the right to perform the documentary act of demanding. The idea that assignment requires the guarantee to be ‘transferable’ is a common misconception; Article 34 allows assignment of proceeds even if the guarantee is not transferable. The independence principle does not allow a guarantor to ignore the documentary requirements of who is authorized to make a demand, as the guarantor deals only with documents and not the underlying financial arrangements between the beneficiary and their lenders.

Takeaway: An assignment of proceeds only entitles the assignee to the funds resulting from a complying demand made by the original beneficiary, whereas only a formal transfer of the guarantee allows a new party to make the demand itself.

Correct: According to the independence principle enshrined in URDG 758 Article 5, a guarantee is by its nature a separate transaction from the underlying contract. The guarantor’s obligation is to examine the presentation of documents to determine, on the face of the documents alone, whether they constitute a complying presentation. If the demand complies with the terms of the guarantee, the guarantor must pay, regardless of any disputes or claims related to the underlying relationship between the applicant and the beneficiary.

Incorrect: Investigating the underlying contract or requiring additional third-party evidence not specified in the guarantee terms violates the autonomy of the demand guarantee and the documentary nature of the instrument. Following the applicant’s instructions to dishonor a complying demand based on an indemnity is a breach of the guarantor’s contractual obligations to the beneficiary and ignores the fundamental principle that the guarantor is not bound by the underlying contract or the applicant’s external claims.

Takeaway: The independence principle requires guarantors to honor complying documentary demands regardless of disputes in the underlying commercial relationship.

Correct: According to URDG 758 Article 33, a beneficiary may assign any proceeds to which it may be or may become entitled under the guarantee. However, the guarantor is not obliged to pay the assignee unless the guarantor has agreed to do so. Furthermore, an assignment of proceeds is distinct from a transfer of the guarantee; the assignee does not become the beneficiary and does not gain the right to demand payment. The original beneficiary remains the only party entitled to make a demand.

Incorrect: The suggestion that assignment is automatically binding upon notice is incorrect because URDG 758 requires the guarantor’s consent to be obligated to the assignee. The claim that the assignee can demand payment in its own name describes a transfer of the guarantee, not an assignment of proceeds. The idea that a guarantee must be ‘transferable’ for proceeds to be assigned is a common misconception; transferability refers to the right to demand, whereas proceeds can be assigned even if the guarantee is non-transferable. Finally, providing an underlying security agreement does not legally compel a guarantor to accept an assignment under international demand guarantee standards.

Takeaway: Under URDG 758, an assignment of proceeds requires the guarantor’s consent to be binding and does not transfer the right to make a demand to the assignee.

Correct: According to URDG 758 Article 19, the guarantor’s obligation is to determine if a presentation appears on its face to be compliant. The rules specifically state that data in a document need not be identical to the data in the guarantee, provided that the data does not conflict with other data in the document, any other required document, or the guarantee itself. In this scenario, an abbreviation like ‘Intl.’ for ‘International’ is generally viewed as non-conflicting and would not constitute a discrepancy.

Incorrect: Applying a strict mirror-image standard is incorrect because URDG 758 allows for non-identical data as long as there is no conflict. Seeking clarification from the applicant is a violation of the independence principle, which requires the guarantor to act independently of the underlying contract and the parties’ external relationships. Verifying legal registrations involves looking at facts outside the documents presented, which contradicts the documentary nature of the guarantee and the ‘on its face’ examination standard.

Takeaway: Under URDG 758, document compliance is based on facial appearance and the absence of conflict between data rather than a requirement for identical wording.