[1] The meaning and characteristics of the independent bank guarantee(s)

[2] The elements for recognizing the beneficiary's claim against the guarantor in an independent bank guarantee constitutes abuse of rights

[1] In a case where a bank made a guarantee and presented a written demand consistent with the terms and conditions of payment of the deposit and the document explicitly demanded in the guarantee, if the bank agreed to pay the deposit demanded by the beneficiary immediately without being bound by any terms and conditions of the underlying contract or the supply of performance, this is not an ordinary guarantee in relation to the principal obligation, but an independent bank guarantee, which is separate from the principal obligor, the client, and the creditor, and at the request of the beneficiary, does not oppose the beneficiary for any reason arising out of the underlying relationship and does not oppose the beneficiary. The guarantor of such independent bank guarantee is liable to pay the amount specified in the guarantee, regardless of whether the applicant is liable for default in relation to the beneficiary, at the request of the beneficiary. In this regard, the independent bank guarantee is distinguishable from the underlying relationship between the beneficiary and the client.

[2] In a case of an independent bank guarantee, the application of the principle of trust and good faith or the principle of prohibition of abuse of rights is not entirely excluded. Thus, when it is objectively apparent that the beneficiary makes a claim against the guarantor by abusing the abstract and unmanned character of the bank guarantee even though the beneficiary does not have any right to the applicant, it is not permissible to use it as an abuse of rights. In such a case, the guarantor may refuse the payment of the deposit upon the beneficiary’s request. However, considering the intrinsic characteristics of the independent bank guarantee, such as the abstract and unmanned nature of the underlying relationship, it shall not be easily recognized as abuse of rights unless the beneficiary can easily recognize the abuse of the beneficiary’s formal legal status, because it is objectively obvious that the beneficiary had no right to the applicant at the time of requesting the deposit, and it is evident that the beneficiary

[1] Article 428 of the Civil Code / [2] Articles 2 and 428 of the Civil Code

[2] Supreme Court Decision 93Da43873 delivered on December 9, 1994 (Gong1995Sang, 437)

Nast Gas Citycom (Law Firm Ansan, Attorneys Lee Sung-hwan et al., Counsel for the plaintiff-appellant)

Korea Exchange Bank Co., Ltd. (Law Firm Handeok, Attorneys Ansan-won et al., Counsel for defendant-appellant)

Seoul High Court Decision 2010Na90786 decided May 9, 2013

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined.

1. In making a guarantee, if the bank agreed that the beneficiary will immediately pay the deposit requested by the beneficiary without being bound by a contract based on which the guarantee is based or any condition of the provision of the performance, the bank is not an ordinary guarantee in relation to the principal obligation, but a so-called "the so-called "the so-called "the so-called "the first demand bank guarantee" in which the bank is bound to pay the unpaid payment obligation only if there is a beneficiary's demand, independent of the underlying obligation and without defense against the beneficiary due to the underlying relationship between the client who is the principal obligor and the creditor, and the beneficiary who is the creditor. In this regard, the guarantor of such independent bank guarantee is liable to pay the amount stated in the guarantee, regardless of whether the applicant is liable for default in relation to the beneficiary, at the request of the beneficiary. In this regard, the independent bank guarantee is separated from the underlying relationship between the beneficiary and the applicant.

However, an independent bank guarantee does not completely exclude the application of the principle of trust and good faith or the principle of prohibition of abuse of rights. Thus, when it is objectively apparent that the beneficiary makes a request to the guarantor by abusing the abstract and unmanned character of the bank guarantee, even though the beneficiary does not have any right to the applicant, it cannot be allowed because it constitutes an abuse of rights. In such a case, the guarantor may refuse the payment of the deposit upon the beneficiary's request (see Supreme Court Decision 93Da43873 delivered on December 9, 1994). However, considering the intrinsic characteristics of the independent bank guarantee, which is separated from the underlying relationship as seen earlier and separated from the underlying nature of the independent bank guarantee, the abuse of rights should not be easily acknowledged unless it is acknowledged that the beneficiary has any right to the applicant at the time of filing a request for the deposit objectively apparent that the beneficiary has no right to the applicant, and it can be recognized without doubt that abuse of the beneficiary's formal legal status.

2. The judgment of the court below on the instant case is as follows.

A. First, the lower court acknowledged the following facts in full view of the admitted evidence.

(1) On December 31, 2007, the Plaintiff, a manufacturer company of automobile parts located in Eul, entered into a contract on the import of fluor type CNG (hereinafter “the instant import contract”) 5,000 fluor (hereinafter “instant fluor”) from ENG companies located in Korea, ENG (hereinafter “S”) to 1,075,000 fluor (hereinafter “the instant import contract”).

(2) On March 18, 2008, at the request of the non-party company, the Defendant issued a performance guarantee for the instant import contract (hereinafter “the instant guarantee”) with the beneficiary as the Plaintiff. The said guarantee states that “When the non-party company, the applicant for the guarantee, determined that the non-party company failed to perform the import contract of this case and claimed in writing by stating the non-performance portion, the Defendant, as the guarantor, would pay the deposit requested by the Plaintiff to the extent that it does not exceed 107,50 roads without any terms and conditions.” Furthermore, according to Article 2 of the Uniform Regulations on the Independent Guarantee of International Commercial Organization, which is invoked as the content of the contract, the letter of guarantee of this case, “The independent guarantee shall be paid by the Guarantee Bank, etc., regardless of its name or content, regardless of its terms and conditions, and shall not be bound by any terms and conditions of the contract or any performance guarantee.”

(3) According to the import contract of this case, the non-party company sent to the plaintiff on May 2008 the first supply 2,400 of the instant actual share to the plaintiff. However, on May 4, 2008, the pipe-type CNzine that the non-party company supplied to the other company of Eul (hereinafter “the instant accident”). On June 15, 2008, the non-party company and the plaintiff reached an agreement between the non-party company and the plaintiff on June 15, 2008 that the non-party company should guarantee the quality of the instant actual share, and if the plaintiff becomes unable to use the said actual share, the non-party company is responsible for all the relevant expenses.

(4) Around July 27, 2008, the State-run Chain Gas Khodro Co., Ltd. (hereinafter “IGKCO”) sent an official letter to the effect that the importation of the Non-Party Company’s CNG sludge will not be approved until the cause of the above accident is discovered, and that the above unemployed will not be used and sold inside the above unemployed until it is confirmed that the pertinent standards are satisfied.

On November 25, 2008, the Plaintiff submitted to the Defendant a written confirmation that the non-party company suffered losses due to the prohibition of use and sale of inside and outside “A” manufactured by the non-party company due to the instant accident, and filed a claim for the payment of the deposit under the instant written guarantee (hereinafter “the instant deposit”).

(5) On May 17, 2009, the Plaintiff and the non-party company agreed to set the Plaintiff’s amount of damages as 342,000 for the lost 2,400 shares already supplied by the Plaintiff. Of them, 142,00 shares, the non-party company paid within three days from the date it received the Plaintiff’s claim and deducted the remainder from the actual 200,000 shares for additional purchase by the Plaintiff.

(6) After that, on August 26, 2009, IGKCO notified that it may be used in Eul if the manufacturer guarantees quality. On September 7, 2009, the Plaintiff used 2,400 display-type accelerators imported from the non-party company, but did not cause any problem.

B. Based on the above facts, the court below determined that, inasmuch as the instant guarantee is independent of the underlying relationship between the client and the beneficiary, and the beneficiary’s request was made without defense against the beneficiary, the guarantor may refuse to pay the deposit upon the beneficiary’s request if the beneficiary’s demand constitutes an abuse of rights, even in the case of independent bank guarantee, the guarantor may refuse to pay the deposit. At the time of the request for the deposit, the Plaintiff is irrelevant to the instant accident. ② The instant guarantee is limited to the pipe-type occupant and can sell the same easily through re-inspection. ③ This prohibition of import and use was irrelevant to the reasons attributable to the non-party company, so it is difficult to hold the non-party company liable for nonperformance of obligations under the import contract of this case, as it constitutes an abuse of rights under the non-party company’s independent contract, and thus, it is objectively determined that the Plaintiff’s claim for additional damages to the non-party company by having the nature of the Plaintiff’s claim to pay the Plaintiff’s additional damages to the non-party company under the condition of suspension of 200.

3. However, it is difficult to accept the above determination by the court below for the following reasons.

A. According to the above legal principles, it is insufficient to say that the Plaintiff’s claim based on the independent bank guarantee constitutes an abuse of rights because the non-party company’s default is not recognized, and there is no right to the non-party company. It should be objectively obvious that the Plaintiff’s claim based on the independent bank guarantee is filed by abusing the abstract and unmanned nature of the independent bank guarantee with the knowledge of the absence of any right.

B. However, based on the facts and records acknowledged by the court below, the following circumstances can be revealed: ① the non-party company's use and sale in the non-party company's “B” was temporarily suspended until the non-party company's use or sale was subsequently published; ② the public text of the IGK is not limited to the pipe-type shop; ③ the IG KCO notifies the non-party company that it can use the non-party company's quality guarantee only on August 26, 2009; ④ the non-party company's right to use the non-party 2,40 U.S. deposit after the non-party company's use of the non-party company's actual 2,00 U.S. deposit is hard to view that the non-party company's use was not subject to the non-party 1's cancellation of the contract after the non-party 2's use of the non-party company's actual 2,400 deposit in the non-party 1's non-party 2, even if the plaintiff actually used the non-party 1's actual 20.

C. Nevertheless, solely based on its stated reasoning, the lower court determined that the Plaintiff’s instant claim constitutes an abuse of rights since it is objectively apparent that it was a claim made by abusing the abstractness and unmanned character of the independent bank guarantee. In so doing, the lower court erred by misapprehending the legal doctrine on abuse of rights in the independent bank guarantee, thereby adversely affecting the conclusion of the judgment.

4. Therefore, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Kim Shin (Presiding Justice)