From pre-contract negotiations to drafting : the quest for consensus in guarantees

LL.M. (Corporate Law)Abstract: In law, it is generally accepted that there is no contract, no obligation which does not consist of agreement, whether it is achieved by the handing over of something or by the use of certain words. This document explores the difference between, a conditional and an unconditional guarantee, and the lack of understanding by the parties who use it, which often leads to the lack of consensus between parties thereto. Moreover, this document will look at the effects of the approval and interpretation of the respective guarantees by the parties thereto. The interpretation by the parties thereto is contrasted, briefly, what the South African can courts have to say about the interpretation of guarantees. It also looks at the South African case law. It will also explore the effects of each guarantee on the underlying contract. This document also explores the abuse and the opportunities thereof by parties to the guarantee. It will look at the circumstances where the autonomy and independence of the guarantee may be ignored and regarding to the underlying contract prevails. This will all be contrasted against the law of Australia. In particular at the meaning of “unconscionability” within the Australian Jurisdiction and the provision of Australian legislation i.e. section 51AA of the Trade. It will conclude and advise on the mitigation of the avoiding the lack of consensus that is perpetuated by the lack of understanding of the effects of each guarantee