6.4 Demand Guarantee

6.4.1 Legal Character A guarantee payable on the beneficiary's first demand — an independent undertaking (like the LC), not a suretyship conditional on the underlying contract's default. 6.4.2 Principle of Autonomy The guarantor bank pays on demand without investigating the underlying dispute. Autonomy is the guarantee's commercial value: cash security without litigation. 6.4.3 Unconditional Payment upon Demand The demand must comply with the guarantee's terms (written demand, any stated documents). Beyond compliance, no condition may be imposed. 6.4.4 Fraud Exception and Enjoining the Bank from Paying Only established fraud — a demand manifestly abusive, e.g., the beneficiary's fraud shown by clear evidence — justifies the court restraining payment. Courts apply the exception narrowly, or autonomy dies. Bertrams' work on bank guarantees in international trade (in the course references) is the classic treatment. 6.4.5 Indemnity by Principal Party/Account Party The applicant indemnifies the bank: if the bank pays under the guarantee, the applicant must reimburse. The bank's exposure is conditional liquidity, and its protection is the counter-indemnity and any cash margin.