London Commodity Exchange brokers demanded a bank guarantee before entering into buying and selling transactions on behalf of their customer, a French trading company. The defendants, the trading company’s bankers, gave the guarantee which contained a conclusive evidence clause: ‘Notice of default shall from time to time, be given by [plaintiffs] to [defendants] and on receipt of any such notice [defendants] will forthwith pay . . the amount stated therein as due, such notice of default being as between [plaintiffs and defendants] conclusive evidence that [defendants’] liability hereunder has accrued in respect of the amount claimed.’
Held: The clause was not contrary to public policy, and so remained valid.
Lord Denning MR said: ‘The question is whether that conclusive evidence clause is conclusive against the party who signs the guarantee. Is he compelled to pay under it even though he alleges that the accounts are erroneous? As matter of principle I should think the clause is binding according to its terms.’
Scar man LJ agreed: ‘[I]t is, I think, clear beyond dispute that the words ‘conclusive evidence’ in this contract of guarantee are to be a bar to any evidence being tendered to show that the statements in the notice of default were not correct.’
Judges:
Lord Denning MR, Megaw LJ, Scarman LJ
Citations:
[1973] 2 Lloyd’s Rep 437
Jurisdiction:
England and Wales
Cited by:
Cited – Van Der Merwe and Another v IIG Capital Llc ChD 13-Nov-2007
The parties had entered into a debt factoring agreement, under which repayment was sought of some $30m, and the claimants were said to have guaranteed the loan by the factor to their company. The court was asked whether the guarantors had the same . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 25 February 2022; Ref: scu.261297