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Assignment of a Bank Guarantee - International Law Office

International Law Office

Banking - Austria

Assignment of a Bank Guarantee

September 15 2000



A recent judgement by the Austrian Supreme Court held that if a bank guarantee is assigned, then any payment of the guaranteeing bank is made in favour of the beneficiary (ie, the assignor). Any misuse of the bank guarantee by the assignee will result in a claim for repayment being filed against the assignor, whether he was aware of the misuse or not.


In a recent case, the plaintiff entered into an agreement with B. The plaintiff had exclusive and non-exclusive rights to sell B's products and promised a turnover of at least Sch1.25 million, subject to successful adaptation of the products. The turnover amount was secured by a bank guarantee. The bank guarantee waived all defences and the checking of the underlying legal relation, and stated that Sch1.25 million would be due within three days of a written notification. The bank was informed about the adaptation of the product as a condition for the turnover. B assigned the rights of the bank guarantee to his creditor (the defendant) in order to secure a bank loan. The guaranteeing bank informed the plaintiff about the assignment. Then the defendant called off the bank guarantee. The plaintiff claimed for repayment of Sch1.25 million alleging that the condition had not materialized.
The defendant denied this and argued that the plaintiff had recourse to B because B had the benefit resulting from the payment.


In first instance, and on appeal, the courts held for the plaintiff. Generally, rights relating to bank guarantees may be assigned; if a call of an assigned bank guarantee is not justified, a claim for repayment of an unjustified enrichment usually has to be filed against the assignee. However, the court held that the general rule was not applicable in this case.

Two relationships were considered: (i) the relationship between the party providing the bank guarantee and the beneficiary, and (ii) the relationship between the guarantor and the beneficiary. The party providing the bank guarantee chooses his contract partner (the beneficiary) by evaluating his financial situation. When the beneficiary calls off the bank guarantee the bank does not examine the legality of the call, the guarantee being considered as an abstract obligation. The party providing the guarantee is confident that the beneficiary only calls off the guarantee if he is entitled to do so. If the call is abusive, the party providing the bank guarantee may sue the beneficiary for repayment. It would be unjustifiable if the beneficiary could frustrate the evaluation of the party providing the guarantee by an assignment.


This solution corresponds to the general principle that faulty relationships shall only have effect between the parties involved. As the defendant was not in a contractual relationship with the plaintiff and did not have sufficient information about the right of the beneficiary to call off the guarantee, he could not be held liable for repayment.

For further information on this topic please contact Dr Peter Pöch or Dr Monika Hirsch at Ortner Pöch Foramitti Rechtsanwälte OEG by telephone (+431 535 37 21) or by fax (+43 1 533 15 55) or by e-mail (opf.vienna@aon.at).

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