Surety in a bank
Your one-stop resource for understanding the nuances of surety and bank guarantees in the United Arab Emirates.
Bank guarantees in the UAE
Are you navigating the complex financial landscape of the UAE? One essential tool at your disposal is the bank guarantee. This legally-binding promise ensures the completion of a payment or service and can provide much-needed assurance in both business and personal dealings.
Guarantees and Article 1092 of the Civil Transactions Law
Article 1092 of the UAE Civil Transactions Law sets the stage for contracts of guarantee, outlining the rights and responsibilities of both guarantors and those they guarantee. According to this law, a guarantee can only be established through an explicit contract. The guarantor's responsibilities are limited to what is agreed upon in the contract and cannot be expanded without the guarantor's express consent.
However, it's worth noting that there are exceptions where Article 1092 may not apply, such as in the case of bank loans or facilities.
Landmark case on contracts of guarantee in financing transactions
A notable case made headlines when the court ruled on the specifics of a contract of guarantee in financing transactions. This case serves as a benchmark for future legal dealings and clarifies how Article 1092 interacts with various forms of financial commitments. The crux of the matter revolved around the contractual obligations and the level of explicitness required for the contract to be enforceable.
Article 1092 of the UAE Civil Code does not apply to a guarantee of a bank loan or facility
Despite the general applicability of Article 1092, it is important to highlight that it does not extend to cover bank loans or facilities. This means that a guarantee of a bank in loan or facility situations operates on a different legal framework, often based on the specific terms and conditions set by the financial institution. Understanding this distinction is crucial for both guarantors and beneficiaries in order to navigate their legal obligations and rights adequately.
When dealing with surety or bank guarantees in the UAE, it is important to consult legal experts to fully understand the implications. Failure to do so can result in unexpected legal and financial complications. This page serves as a preliminary guide, but due diligence and legal advice are strongly recommended for any serious commitments.