Shipbuilding Guarantees: Anti-Discharge Provisions and the Purview Doctrine
In shipbuilding contracts there will inevitably be variations to the specification, plans, drawings, delivery date, and the contract price. Whether such variations can discharge the guarantor’s obligation under related payment or refund guarantees will depend on whether such guarantees are a traditional or a demand guarantee. With regard to traditional guarantee, it was held in Holme v Brunskill [1] , that any material variation of the underlying contract without the surety’s consent will discharge the surety from liability under the guarantee, except where it is self-evident that the alteration is insubstantial or beneficial to the surety. This is also because the liability of the debtor and surety under a traditional guarantee are co-extensive. In contrast, the rule will not apply to a demand guarantee, which is payable without proof or condition, independent of the underlying contract and can simply be activated by a demand made on the bank. To circumvent the rule in Holme v