For many years,I used to think that court interventions in bank guarantee transactions were harmful to the credibility of the international bank guarantee. Bank guarantees are an unconditional payment undertaking of banks and thus when a claim is made by the beneficiary,usually with a statement of the applicant's default or failure to carry out contractual obligations,payment would be made forthwith. There is no need for proof of the applicant's default in this procedure. The mere statement by the beneficiary would trigger payment.

With a bank guarantee ensuring the performance of the applicant,the beneficiary would rest assured that the applicant would carry out his contractual obligations; if he does not do so,the beneficiary can simply ask his banker to send a claim for payment to the issuing bank of the bank guarantee.

Not having much opportunity to come across court interventions in bank guarantees,I agreed with banking commentators as well as legal commentators that the courts should try to stay out of bank guarantee transactions.

Then in 2011 a Singapore case JBE Properties Pte Ltd v Gammon Pte Ltd came out from the Singapore court. In this case,the principle of unconscionability was used to stop payment on a claim made by the beneficiary under a bank guarantee.