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ARTICLE · 21 MAY 2024

Be Aware Of Discharging A Guarantee

Vincent Young
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In the construction industry, it is common for a parent company/guarantor of a contractor to provide a guarantee to the principal. The guarantee usually includes the assumption...

AustraliaReal Estate and Construction
Vincent Young
Vincent Young

In the construction industry, it is common for a parent company/guarantor of a contractor to provide a guarantee to the principal. The guarantee usually includes the assumption of liability for any obligation owed by the contractor to the principal should the contractor fail to meet its obligations.

This article deals with the circumstance in which a guarantor may be discharged from its liability under a guarantee (the Ankar Principle) and how drafters of guarantees have avoided such a circumstance (the Anti-Ankar drafting).

Ankar Principle

The Ankar Principle is derived from the High Court's decision in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 548. In short, the Ankar Principle provides that a guarantor will be discharged from their entire liability under a guarantee if:

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