Make an enquiry

    Enquiry Form









    Contact

      Enquiry Form






      Supporting Document


      We are welcoming clients back to our offices Find Out More
      FJG Solicitors in Essex, Colchester, Chelmsford, London – Fisher Jones Greenwood
      • 0845 543 5700
      • [email protected]
      • Make an enquiry
      • Online Payment
      • Home
      • Services
        • Services for you
          • Advocacy
          • Civil & Commercial Disputes
          • Clinical and Medical Negligence
          • Conveyancing
          • Employment Law
          • Family Law
          • Children Law
          • Immigration & Visas
          • Notary Services
          • Personal Injury
          • Wills, Life Planning & Probate
        • Services for business
          • Academies Portal
          • Agricultural and Rural
          • Business Immigration
          • Commercial Dispute Resolution
          • Commercial Litigation
          • Professional Negligence
          • Commercial Property
          • Construction Law
          • Planning Consultancy
          • Corporate and Commercial
          • Education Services
          • Employment Law
          • Healthcare Services
          • International Services
          • Landlord & Tenant Services
        • Services by sector
          • Agriculture & Estates
          • Care Homes
          • Charities & Social Enterprise
          • Construction
          • Education Law
          • Energy
          • Family Owned Business
          • Healthcare & Dentistry
      • Our people
      • About us
        • CSR
        • Awards
        • Our Vision
        • Accessibility
        • Careers
        • Work Experience
        • Equality & Diversity
        • FLOCC
        • FJG Foundation
        • SAFE Forum
      • News, Events & Insights
      • Blog
      • Podcasts
      • Contact us
        • Colchester
        • Chelmsford
        • Clacton-on-Sea
        • Billericay
        • Braintree
        • Frinton-on-Sea
        • Holland-on-Sea
        • London

      Guarantees

      21 August 2013 by Tony Fisher

      Tony Fisher

      The Court of Appeal has recently decided a case concerning guarantees, a notoriously complex area of law. In the case CIMC Raffles Offshore (Singapore) Ltd and another v Schahin Holding SA the court considered at what point a guarantor of a contract was still liable despite amendments to the contract.

      The contract related to the manufacture and later sale of two drilling rigs. The builder fell behind schedule and agreed with the buyer to vary the payment dates and amounts to reflect the delay. The buyer provided the builder with a parent company guarantee in respect of these payments.

      After the guarantee was made, the sums due after delivery were substantially increased by a further variation of the contract. The delivery dates were also delayed. The consequence of these amendments was an increase in liability of the guarantor if the buyer failed to make the post-delivery payments.

      Eventually the rigs were delivered but the buyer did not make the post-delivery payments. The builder then called on the guarantee.

      However, at this point the guarantor refused to pay, arguing that the further amendments after its guarantee had been given discharged their liability. The guarantor argued that it was no longer liable despite the fact that the guarantee specifically contained an anti-discharge provision which stated that the guarantor’s liability would not be altered if the guaranteed obligations were extended or if any of the terms of the guaranteed obligations were amended. Even without notice to the guarantor.

      Is this stance tenable?

      Where a variation to a guaranteed contract is in terms that are fundamentally different from the original contract, it is no longer regarded as being a variation to the original contract at all. Consequently it falls outside what is known as the ‘purview’ of the original contract.

      In this case it was the original rig building contract that was varied. The nature of the guaranteed obligations remained the same despite the fact that the variations and the liabilities were ones which the buyer would have been responsible for in any event.

      Arguably then, the variations fell completely within the purview of the guarantee. Problem solved?

      Not quite. Owing to the changes the liability of the guarantor, and the risk of the guarantee being called in, were significantly increased. The facts of the case play a key role: it was the builder that put the project in jeopardy; the guarantee was provided mainly as security for the builder and the delay of substantial milestone payments until after delivery of the rig increased equity in the rig after delivery, which was an entirely unexpected event.

      Conclusion

      Unfortunately, it was decided that this case was not one for summary disposal (it was an appeal against the summary enforcement of the guarantee). The purview issue will now be considered, along with a number of other issues, at trial.

      This case highlights however how carefully guarantees need to be drafted. To be on the safe side the guarantors consent should always be obtained when any variations to a contract are being made.

      Authors
      Archives
      Subscribe to RSS feed

      Recent Posts

      • Worth the wait
      • What is a section 37 report?
      • What is a section 7 report?
      @FJGSolicitors

      We've had a 5* review from Zoe: Moving home https://t.co/4lbJehtq0g

      6 hours

      RT @MistleyCC: How good did the new T20 kit look on Thursday?! 🔥 A massive thanks to @FJGSolicitors for sponsoring our kit this year! https…

      22 hours

      We've had a 5* review from Nicholas: EXCELLENT ADVICE AND VERY EFFICIENT https://t.co/4lbJehtq0g

      1 day
      Billericay 01277 623132
      Braintree 01376 552828
      Chelmsford 01245 890110
      Colchester 01206 835300
      Clacton 01255 323103
      Frinton 01255 514100
      Holland-on-Sea 01255 818900
      London 08455 435700
      Sudbury 01787 373387
      • Disclaimer
      • Accessibility
      • Terms & Conditions
      • Privacy Policy
      • Cookies
      • Price & Service
      • Signup to our Newsletter
      • COVID-19 Risk Assessment

      Fisher Jones Greenwood is the trading name of Fisher Jones Greenwood LLP, a Limited Liability Partnership authorised and regulated by the Solicitors Regulation Authority and registered in England ( Number: OC305854 ). A list of members is available for inspection at the registered office at Charter Court, Newcomen Way, Colchester Business Park, Colchester, Essex CO4 9YA

      This website uses cookies & data collection

      Our website uses cookies, which are small text files that are placed on your computer by websites that you visit to distinguish you from other users. They are widely used in order to help website owners like us provide you with the best user experience possible. They also provide us with information that can help us improve our websites and marketing activities. By clicking an item or link on this website, you agree to the use of cookies and other data collection.

      Find out more

      We are welcoming clients back to our offices

      Differing tiers and three lockdowns later, Fisher Jones Greenwood Solicitors are now pleased to be able to welcome clients safely back to our offices.

      Remote working and the digitalisation of the way we work, have been key to keeping FJG and the rest of the country going.

      • We are now able to offer, pre-booked face-to-face appointments. Although, we are still able to offer remote appointments if preferred.
      • You can continue to visit our offices at any time to post any correspondence and documents through letterboxes.

      If you are visiting an FJG office, covid-19 safety rules of social distancing, hand sanitization, and the wearing of masks will still apply.

      • Please be aware you will also need to have your temperature taken on arrival.
      • There will also be protective screens in place to protect you and our staff.

      Please do not hesitate to contact your legal adviser by email or by telephone should you have any worries or concerns. Alternatively, please call our main switchboard number (01206 835300), and a message to return your call will be relayed to the relevant person.

      Best wishes
      Paula Cameron
      Managing Partner