ABSTRACT
This chapter provides an overview of the key aspects of guarantees in relation to offshore construction contracts. Performance guarantees may be required to be provided on behalf of the Contractor to secure the Company's claim for its losses in the event of the Contractor's default. The nature of a conventional guarantee or guarantee of surety is that the guarantor stands in the shoes of the party to the contract whose performance or payment obligation is being guaranteed. An on demand guarantee restricts the obligations under the guarantee to the terms of the document itself, rather than depending on performance of the underlying contract. The requirements for the enforcement of guarantees vary with the contract wording and are a question of interpretation of the wording of the individual guarantee. The common solution is for the guarantor to be required to confirm in the guarantee that its liability under the guarantee continues, notwithstanding variations to the underlying contract.
