DCW Monthly: December 2024
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In McNeil & NRM Inc. v. SA Bank Audi France, the court ruled on a dispute over an advance payment guarantee. The case highlights the importance of precise guarantee wording and adherence to standard practices in international transactions.
In Mc Neil & NRM Inc. v. SA Bank Audi France, the Commercial Court of Paris issued a decision on 14 January 2022 concerning an advance payment guarantee dispute.
KOLON DACC COMPOSITE Co., LTD (“Kolon”) ordered specified equipment for USD 2,282,113 from Mc NEIL & NRM INC. (“McNeil”). Payment was required in five stages according to the contract with a delivery time indicated in ex- works and estimated at 12 months after receipt of the order, deposit, and clarification of all technical details. The contract called for a deposit of 30% of the total price supported by an advance payment guarantee of the same amount as the deposit. Kolon sent the 30% deposit secured by an advance payment guarantee issued by SA BANK AUDI FRANCE (“Bank Audi”) advised to Kolon via KEB HANA BANK (“KEB”). Under the terms of the contract, the estimated delivery date of 12 months had to be verified within three weeks after receipt of the order.
According to Kolon, McNeil never started the project, did not communicate expected plans, and did not verify the expected delivery date despite several exchanges, reminders and meetings between the parties. As a result, five months after the order was placed, Kolon notified McNeil of its concerns over the project’s delay and required McNeil to remedy the deficiencies within the one-month notice period required for termination of the purchase order contract.
Because Kolon believed that McNeil provided no cure or satisfactory explanation of delays or details of the expected delivery date within the one-month contractual advance notice period for cancellation of the contract, Kolon notified McNeil that it was canceling the contract and requested return of the deposit monies Kolon paid to McNeil. McNeil failed to refund Kolon’s deposit. Kolon then made demand under the advance payment guarantee supported by a statement that McNeil was in default under the contract for which the advance payment guarantee was issued.
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