A bank issues an unconditional BANK GUARANTEE in favour of B to secure C's performance. C commits default and B invokes the guarantee, but C disputes the underlying contract. As a general rule of the law of guarantees, the bank:

A bank guarantee is a contract between the bank (surety) and the beneficiary, and is independent of the underlying contract between the principal debtor and the beneficiary. Unless the guarantee itself imposes such conditions, a bank must HONOUR the amount on demand; the bank's liability is primary. Payment can be restrained only in exceptional cases, such as an established fraud or an irretrievable injury, not merely because the principal debtor disputes the transaction. This autonomy principle makes bank guarantees reliable instruments of security. It is a cornerstone of commercial law and of PSU procurement.