A letter of guaranty is an agreement by which at the request or on the instructions of the principal, the guarantor undertakes to pay a fixed amount to the beneficiary upon the latter’s first call.
Letters of guaranty and counter-guaranty may not under penalty of being declared void be subscribed by natural persons.
Guarantee agreements shall not be presumed and must be recorded in writing and shall indicate under penalty of being declared void certain important information to wit;
- The designation of the letter of guaranty, or counter-guaranty at first call;
- The name of the principal;
- The name of the beneficiary;
- The name of the guarantor or counter-guarantor;
- The initial agreement, the action or event giving rise to the issue of the guarantee etc.
Unless otherwise provided for, the beneficiary’s guarantee right shall not be transferable. However, the inalienability of the guaranteed right shall not affect the beneficiary’s right to transfer any amount he is entitled to by virtue of the basic yield.
Unless otherwise provided for, the principal’s instructions, the guarantee and counter-guarantee shall be irrevocable.
The guarantor and counter-guarantor shall be liable only to the extent of the amount stipulated in the letters of guaranty or counter-guaranty, subject to deduction of previous payments made by the guarantor or the principal unchallenged by the beneficiary.
The letter of guaranty may provide that the amount secured shall be reduced by an amount determined or to be determined on specific dates or against the presentation of the guarantor or counter-guarantor of the documents required for that purpose.