the principal have not stipulated that there is a default under the original underlying contract. [39] The principles I set out in the preceding paragraphs were recognised in the matter of Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others where the Court commented that: 'The guarantee by Lombard is not unlike irrevocable letters of credit issued by banks and used in international trade, the essential feature of which is the establishment of a contractual obligation on the part of a bank to pay the beneficiary (seller). This obligation is wholly independent of the underlying contract of sale and assures the seller of payment of the purchase price before he or she parts with the goods being sold. Whatever disputes may subsequently arise between buyer and seller is of no moment insofar as the bank's obligation is concerned The bank … undertakes to pay provided only that the conditions specified in the credit are met. The only basis upon which the bank can escape liability is proof of fraud on the part of the beneficiary.' [40] A bank issuing an on demand guarantee is only obliged to pay where a demand meets the terms of the guarantee. Such a demand, which complies with the terms of the guarantee, provides conclusive evidence that payment is due. From this it follows that the beneficiary in the case of an on demand guarantee should comply with the requirements stipulated in the guarantee. In Frans Maas (UK) Ltd v Habib Bank AG Zurich Bank 14 [2001] Lloyd’s Rep para 58, it was put as follows: question is: what was the promise which the bank made to the ‘The beneficiary under the credit, and did the beneficiary avail himself of that promise? … It is a question of a construction of the bond. If that view of the law is unattractive to banks, the remedy lies in their own hands.’ [41] In the matter of Minister of Transport and Public Works, Western Cape & Another v Zanbuild Construction (Pty) Ltd & Another, it was stated that all that is required for payment is a demand by the beneficiary, stated to be on
the principal have not stipulated that there is a default under the original underlying contract. [39] The principles I set out in the preceding paragraphs were recognised in the matter of Lombard Insurance Co Ltd v Landmark Holdings (Pty) Ltd and Others where the Court commented that: 'The guarantee by Lombard is not unlike irrevocable letters of credit issued by banks and used in international trade, the essential feature of which is the establishment of a contractual obligation on the part of a bank to pay the beneficiary (seller). This obligation is wholly independent of the underlying contract of sale and assures the seller of payment of the purchase price before he or she parts with the goods being sold. Whatever disputes may subsequently arise between buyer and seller is of no moment insofar as the bank's obligation is concerned … The bank undertakes to pay provided only that the conditions specified in the credit are met. The only basis upon which the bank can escape liability is proof of fraud on the part of the beneficiary.' [40] A bank issuing an on demand guarantee is only obliged to pay where a demand meets the terms of the guarantee. Such a demand, which complies with the terms of the guarantee, provides conclusive evidence that payment is due. From this it follows that the beneficiary in the case of an on demand guarantee should comply with the requirements stipulated in the guarantee. In Frans Maas (UK) Ltd v Habib Bank AG Zurich [2001] Lloyd’s Rep Bank 14 para 58, it was put as follows: ‘The question is: what was the promise which the bank made to the beneficiary under the credit, and did the beneficiary avail himself of that promise? … It is a question of a construction of the bond. If that view of the law is unattractive to banks, the remedy lies in their own hands.’ [41] In the matter of Minister of Transport and Public Works, Western Cape & Another v Zanbuild Construction (Pty) Ltd & Another, it was stated that all that is required for payment is a demand by the beneficiary, stated to be on