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Refund Guarantee and Legal Standard of Abuse of a Right - Focused on a Case Study on the Korea Supreme Court Decision -

  • Journal of International Business Transactions Law
  • Abbr : IBT
  • 2016, (15), pp.121-148
  • Publisher : The Institute for Legal Studies Dong-A University
  • Research Area : Social Science > Law > Private Law > International Commercial Transactions Law

Dae Chung 1

1한국해양대학교 해사법학부

Candidate

ABSTRACT

Ship finance is closely related to shipping industry, shipbuilding industry and banking industry and, therefore, complex contractual relationship exists under ship finance. A ship is the most important asset in a shipping company. A price of ship is very expensive and shipbuilding is long-term process. A buyer, therefore, worries about default or bankruptcy of a builder in the course of shipbuilding. So, the buyer asks for refund guarantee regarding a shipbuilding contract. As an applicant, the builder makes an effort to obtain the refund guarantee from a guarantor. Usually, a commercial bank becomes a guarantor. This refund guarantee is a kind of independent bank guarantees and the buyer becomes a beneficiary under refund guarantee. One of significant characteristics of refund guarantee is independence. According to the independence, refund guarantee is independent of the shipbuilding contract which is an underlying contract. The guarantor, therefore, irrevocably and unconditionally guarantees repayment of advance payment. However, the independence of refund guarantee is not absolute. Therefore, the independence of refund guarantee should be limited under the principle of prohibition of abuse of a right. In this connection, the Korea Supreme Court decided the refund guarantee case and made clear legal standard of abuse of a right. In conclusion, first, the independence of refund guarantee should be restricted under the principle of prohibition of abuse of a right. Second, when the abuse of a right of a beneficiary is objectively clear, a guarantor can refuse repayment of advance payment in spite of the independence of refund guarantee.

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