Court of Appeal casts doubt over the effectiveness of anti-discharge provisions

In CIMC Raffles Offshore (Singapore) Ltd & anr v Schahin Holdings SA [2013] EWCA Civ 644, 7 June 2013 the Court of Appeal has allowed an appeal in a case concerning the extent to which a guarantee still applies if the guaranteed contract has been varied so that it fundamentally differs from the original guaranteed contract which was entered into by the parties.

The Court of Appeal’s comments in this case cast doubt on the effectiveness of anti-discharge provisions in guarantees (which are often included in order to avoid amendments made to guaranteed contracts rendering the guarantee unenforceable).

The parties entered into a contract in 2006 (the Contract) which concerned the construction of two drilling rigs by CIMC Raffles Offshore (Singapore) Ltd and Yantai CIMC Raffles Offshore Ltd (the claimants) and the purchase of these drilling rigs by two subsidiaries of Schahin Holding SA (the defendant)…

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