The Court said that the issue was one of construction of the terms of the guarantee and the principal focus was on the natural and ordinary meaning of the language used.
It was an unusual feature of the case that each side, for the construction it proffered, required the language of the document to be disturbed. So the Court had to assess what degree of disturbance to the wording (if any) was required.
The Court decided that the conclusive evidence clause should be upheld. That meant that the issue of whether or not there had been a default by the contractor no longer arose; the existence of the stated circumstance, namely, insolvency, was conclusive evidence of default and the obligation to make payment.
The next issue was to decide what sum then became due and it was any sum payable in consequence of the default, but only in order to indemnify (that is, compensate) the pursuer. The Court confirmed that defences, counterclaims and rights of set off would be available to the defender, in the same way as they would have been available to the contractor.
The Court found that the guarantee was a hybrid, having language suggestive of an on-demand element, but also, allowing that on-demand feature only to go the distance of allowing recovery in an insolvency context, but subject to the invocation of defences and the like which will preclude over-compensation.