Can a RN cancel the rights of a Bank Guarantee?

[AnonymousParticipant]

I thought I had read/learnt (mostly on this forum, thanks to Drakan etc.) everything there is to know about Bank Guarantees.

But………have just heard some new (mis?)information that I wonder if any ‘legal eagles’ out there can answer/make clear.

We understood that in order to enforce a Bank Guarantee, it is required to obtain a Requerimiento Notarial to ‘officially’ make the contract null and void – even though the contract date has expired. Even the issuing bank of the guarantee confirmed this to us as one of its requirements as one of the documents needed.

HOWEVER, a couple of people have informed me that one has to be very careful.
They say that the action of cancelling a contract by way of a RN gives the bank (who granted the guarantee) an argument not to pay out under the terms of the bank guarantee, as the right to execute the aval comes from the contract……. 😯 !!

This could then leave you without compensation from the company or the bank.
Seems like potentially a classic CATCH 22 situation.

a) Can’t enforce the BG without an RN
b) A RN could lose you the rights of the BG

Any comments/advice/knowledge appreciated!!!
(Drakan, I know you are sick to death of the subject of BG’s, but please bite the bullet on this one…..)

[AnonymousParticipant]

You must be careful with the RN. Let the lawyer handle it.

The whole point of the RN is that you offically notificate the bank that the developer is in breach of a contract clause.

What you seek then is to enforce a contractual clause that states that in case of a breach of contract you are entitled to execute your bank guarantee.

A breach of contract would be, for example, If in the contract you agreed with the developer that he had to obtain a BL in a given deadline and once this is due and he has failed to obtain it, he is effectively breaching a contractual clause and you can therefor claim the execution of a BG.

Your lawyer then sends a RN (and probably a few more I’ll add) to force the bank to fulfill its obligation.It takes time for us lawyers because banks are renuant to give away easily there money no matter how right you may be.

There is no catch22 situation, because you do not send them a RN in which you state the contract is null and void. Let your lawyer handle the matter.

Believe me,If the developer falis to obtain a BL in the timeline highlighted in the contract you (= lawyer) may and can enforce a BG. Thre is no problem,it only takes some time, perhaps a few weeks ormore likely 4-6 months.

It really depends on many things and some banks put more of a fight than others thus some execute it swiftly and others is a perfect nightmare for us lawyers (and clients, of course).

[AnonymousParticipant]

Thank you Drakan – I understand.
Don’t worry, I am leaving everything in the hands of my new lawyer, I was just impatiently curious/wanting to learn.

Any good/bad/any experiences enforcing a BG with Banco Popular Hipotecario in Madrid????

[AnonymousParticipant]

I just came across your post from 2006. It’s a long time ago but did your lawyer get you the necessary RN and were you successful against the bank?

I am really interested to know, as our lawyer bypassed the Notary and we lost in court against Banco Popular.

[AnonymousParticipant]

I just came across your post from 2006. It’s a long time ago but did your lawyer get you the necessary RN and were you successful against the bank?

I am really interested to know, as our lawyer bypassed the Notary and we lost in court against Banco Popular.

[Author]

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