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Guarantee Contract and Principal Contract: Conflicts in Jurisdiction

20 August 2010

Projects (Engineering and Construction)

This article analyses Article 129 of an Interpretation published by the PRC Supreme People's Court ("SPC"), and considers different results which may arise under PRC and non-PRC law, where the Principal Contract specifies a dispute resolution mechanism, while the Guarantee Contract does not specify a (or specifies a different) dispute resolution mechanism.


Given that in addition to a Construction Contract (which can be seen as the Principal Contract) between the Employer and the Contractor, either party may be required to obtain a Guarantee Contract (eg by way of a Parent Company Guarantee, Personal Guarantee by a Director, or a Bank Guarantee), care should be taken to avoid unexpected results. 


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