Analysis of legal nature of bank guarantees in Iranian Law

Bank guarantee or Independent guarantee is a contract or a document whereby the issuer (guarantor), upon the request of the applicant (principal), is committed against the beneficiary (guaranteed side) that on demand or at a certain maturity, without any stipulation to pay a certain amount of cash for a specific issue which is related to the beneficiary or to the order of him/her. According to this definition about the legal nature of bank guarantees, one can consider four perspectives: Some have considered this banking document as a justification for civil liability conclusion stipulated in Article 684 of the Civil Code. However, some other group believe that the nature of banking guarantees can be justified in accordance with articles 402-411 of Commerce Act. Another group consider bank guarantees as bank's unilateral commitment against the beneficiary and another group believe that guarantee issuance is dependent on a contract between guarantee applicant and guarantor bank accord- ing to which a provision shall be specified in favor of the third party namely the beneficiary. Nevertheless, after criticism and analysis of reasons of supporters for any of the opinions, we conclude that bank guarantees are private contracts set forth in Article 10 of Civil Code. But in recent trade bill, the legislator had a tendency towards a condition to consider and interpret bank guarantees as subsets of certain contracts stipulated in Commercial Code.