URDG 758: Demand Guarantees
Pay on a complying demand, argue about the contract later. Here are the rules and the numbers behind them.
A demand guarantee is a bank's promise to pay the beneficiary on a complying demand, without first deciding who is right in the underlying contract. Bid bonds, performance guarantees, advance payment guarantees and retention guarantees in international contracts are usually demand guarantees.
URDG 758, the ICC Uniform Rules for Demand Guarantees, took effect on 1 July 2010, replacing URDG 458. Like every ICC rule set, they apply only when the guarantee or counter-guarantee expressly indicates it is subject to them (Article 1).
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Parties and Terms
- Guarantee
- Any signed undertaking, however named or described, providing for payment on presentation of a complying demand.
- Applicant
- The party whose obligation under the underlying relationship the guarantee supports, often the Indian exporter or contractor.
- Instructing party
- The party, other than a counter-guarantor, who instructs the issue of the guarantee and is responsible for indemnifying the guarantor. It may or may not be the applicant, for example a parent company instructing for a subsidiary.
- Guarantor
- The bank that issues the guarantee.
- Counter-guarantee
- A signed undertaking given by a counter-guarantor to another party to procure the issue of a guarantee or another counter-guarantee. Typical when an Indian bank asks a bank in the beneficiary's country to issue a local guarantee.
- Expiry
- The expiry date or the expiry event, or if both are given, whichever is earlier.
The Core Principles
- check_circleIrrevocable on issue, even if it does not say so (Article 4).
- check_circleIndependent of the underlying contract and of the application (Article 5). A dispute about performance does not stop payment of a complying demand.
- check_circleDocumentary: a condition with no document to evidence it is disregarded, unless compliance can be determined from the guarantor's own records or a specified index (Article 7).
- check_circleEvery demand must be supported by the documents the guarantee specifies and, in any event, by the beneficiary's statement of the respect in which the applicant is in breach (Article 15). The guarantee can exclude this statement expressly.
The Numbers URDG 758 Fixes
Examination of a demand
Period
Within five business days following the day of presentation
Article
20(a)
Rejection notice
Period
A single notice listing each discrepancy, no later than the close of the fifth business day following presentation
Article
24(d)-(e)
Extend or pay
Period
Guarantor may suspend payment for up to 30 calendar days after receiving the demand
Article
23(a)
No expiry date or event stated
Period
Guarantee ends three years after issue; counter-guarantee 30 calendar days after the guarantee ends
Article
25(c)
Expiry during force majeure
Period
Guarantee and any counter-guarantee extended 30 calendar days from when they would otherwise have expired
Article
26(b)
| Rule | Period | Article |
|---|---|---|
| Examination of a demand | Within five business days following the day of presentation | 20(a) |
| Rejection notice | A single notice listing each discrepancy, no later than the close of the fifth business day following presentation | 24(d)-(e) |
| Extend or pay | Guarantor may suspend payment for up to 30 calendar days after receiving the demand | 23(a) |
| No expiry date or event stated | Guarantee ends three years after issue; counter-guarantee 30 calendar days after the guarantee ends | 25(c) |
| Expiry during force majeure | Guarantee and any counter-guarantee extended 30 calendar days from when they would otherwise have expired | 26(b) |
Counter-guarantees, expiry and extend or pay. No signup.
Governing Law and the Indian Overlay
Unless the guarantee says otherwise, it is governed by the law of the issuing branch's location, and disputes go to that country's courts (Articles 34 and 35). For an Indian bank, the FEMA side is separate: a guarantee involving a person resident outside India must also fit the Foreign Exchange Management (Guarantees) Regulations, 2026 (Notification FEMA 8(R)/2026-RB), which replaced the 2000 regulations. URDG settles how the guarantee works; FEMA settles whether it may be given.
How CCFE Tests This
- check_circleDefinition MCQs: counter-guarantee and counter-guarantor, guarantor, instructing party. The trap is swapping counter-guarantor with applicant.
- check_circle"When does URDG 758 apply?" Only when the guarantee expressly says so; not because the bank uses URDG elsewhere.
- check_circleDay counts: five business days, 30 calendar days, three years. Candidates mix them with UCP 600's banking days.
- check_circle"Expiry date and expiry event both stated, which governs?" The earlier one.
- check_circleNon-documentary conditions: disregarded, unless the guarantor can check them from its own records.
FAQs
What is URDG 758?expand_more
ICC's Uniform Rules for Demand Guarantees, Publication No. 758, effective 1 July 2010. They govern demand guarantees and counter-guarantees that expressly state they are subject to them.
What is a statement of breach under URDG 758?expand_more
The beneficiary's statement, required with every demand unless the guarantee excludes it, indicating in what respect the applicant is in breach of the underlying contract (Article 15).
What is extend or pay?expand_more
A demand that asks for payment or, as an alternative, an extension of expiry. The guarantor may suspend payment for up to 30 calendar days while the applicant decides whether to extend (Article 23).
What happens if a URDG guarantee has no expiry date?expand_more
It terminates three years after the date of issue, and any counter-guarantee 30 calendar days after the guarantee terminates (Article 25(c)).
How long does a guarantor have to examine a demand under URDG 758?expand_more
Five business days following the day of presentation, with any rejection notice sent no later than the close of the fifth business day.
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