Hold for Value – What Does It Mean?

QUESTION

Dear Mr. Old Man,

I sometimes come across the phrase “hold for value” used in guarantees. I have read some materials about it, but I do not understand its purpose.

Can you please share your view on this issue?

Thank you.
———

ANSWER

Hi,

The phrase “Hold for value request” or “extend or hold for value” or “pay or hold for value” is similar to the phrase “extend or pay” used in Article 23 URDG 758, which says where a complying demand includes, as an alternative, a request to extend the expiry, the guarantor may suspend payment for a period not exceeding 30 calendar days following its receipt of the demand.

The demand for payment is deemed to be withdrawn if the period of extension request in that payment agreed by the party making that demand is granted. If no such period of extension is granted, the complying demand shall be paid without the need to present any further demand.

In short, “Hold for value request” is a demand for payment that includes a request to extend the expiry date of the guarantee. This would occur when the beneficiary does not seek payment at the time, but wishes to avoid the lapse of the guarantee.

Kind regards,
Mr. Old Man