Preventing The Enforcement Of A First Demand Guarantee Within A Few Weeks' Time: Story Of A Successful Case

Author:Ms Flore Foyatier
Profession:Soulier Avocats

To prevent the abusive and imminent enforcement of a first demand guarantee, Soulier AARPI, represented by Mrs. Catherine Nommick, Ms. Flore Foyatier and Ms. Isabelle Cottin, obtained in less than a week an injunction from the President of the Commercial Court of Paris who ordered the bank to suspend the payment of the funds under the guarantee pending a decision of the summary judge, and then, in less than a month, a decision of the summary judge who acknowledged that the request for enforcement of the guarantee was obviously abusive, and enjoined the bank not to grant such a request.

This lawsuit - managed in a situation of urgency with a successful outcome - provides the opportunity to recall the circumstances and procedural means in/by which the request for enforcement of a first demand guarantee can be successfully challenged.

Many lawsuits drag on. Procedural issues, recourses, expert investigations and other delaying tactics are primarily the main cause for delay. The lack of human resources in courts and understaffed police forces also contribute to the slowness that litigants have to deal with.

Fortunately, in some cases where matters are skillfully brought to court, judges can, within a few days, prevent the irremediable.

We have benefited from this exceptional court reactiveness in a case where we defended an international construction group and its Tunisian subsidiary.

A first demand guarantee issued by a French bank and a construction project in Tunisia Our clients, the parent company, as guarantor, and its Tunisian subsidiary, as contractor, had entered into a contract for the refurbishment of a luxury hotel in Tunisia with another Tunisian company, as project owner.

Following instructions from our client (the "Principal"), a first demand guarantee had been issued by a French bank (the "Guarantor") to the benefit of the project owner (the "Beneficiary").

Under this guarantee, the bank committed to "immediately pay to the Project Owner, in the event the latter considers that the works have not been performed as per the clauses of the works contract, any sum up to the amount set forth above, on first written demand".

As such, our client granted to the project owner a so-called "independent guarantee" within the meaning of Article 2321 of the French Civil Code.

Facing serious financial difficulties, the project owner stopped paying the provisional invoices issued by our client.

After several months of negotiation and...

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