Supardi, Azizan and Adnan, Hamimah and Yaakob, Jamaluddin (2007): The legal conditionality of performance bond in Malaysian construction contract. Published in: Built Environmental Journal , Vol. 4, No. 2 (2007): pp. 11-22.
Download (203Kb) | Preview
In construction contracts, a 'performance bond' is a bond taken out by the contractor, usually with a bank or insurance company (in return for payment of a premium), for the benefit of and at the request of the employer, in a stipulated maximum sum of liability and enforceable by the employer in the event of the contractor's default, repudiation or insolvency. There are two types of performance bonds: Conditional bond or default bond; and Unconditional bond or on-demand bond. However, in Malaysia, the question of whether the performance bond in a construction contract is a conditional or an unconditional guarantees is still one of the issues relating to performance bond that has been discussed. Therefore, the objective of this research is to determine the phrase(s) in the Performance Bond in a construction contract that determine whether the performance bond is a conditional or unconditional on demand guarantee. In order to achieve this objective, the research was conducted by analyzing relevant court cases. From the findings, it can be concluded that unless an undisputed meaning of the words in the performance bond to make the performance bond to be purely conditional or unconditional 'on-demand' bond, most court interpreted performance bond to be an on-demand performance bond which is only conditional upon the beneficiary asserting the basis of the claim upon the issuer of the bond contending that there has been breach of contract.
|Item Type:||MPRA Paper|
|Original Title:||The legal conditionality of performance bond in Malaysian construction contract|
|English Title:||The legal conditionality of performance bond in Malaysian construction contract|
|Keywords:||Performance Bond; Conditional Bond; Unconditional on-demand Bond; Malaysian Construction Contract|
|Subjects:||K - Law and Economics > K3 - Other Substantive Areas of Law > K32 - Environmental, Health, and Safety Law
K - Law and Economics > K1 - Basic Areas of Law > K12 - Contract Law
L - Industrial Organization > L7 - Industry Studies: Primary Products and Construction > L74 - Construction
|Depositing User:||Azizan Supardi|
|Date Deposited:||19. Oct 2011 17:52|
|Last Modified:||16. Feb 2013 10:18|
Abdul-Rashid, K. (2004). Guarantee Against Non-Performance of Construction Contract by the Contractor: Performance Guarantee Sum versus Performance Bond, Seminar, 1st International Conference, Toronto Canada, May 27 2004 – May 28 2004, World of Construction Project Management.
Fong, C.K. (2004a). Law and Practice of Construction Contracts, 3rd Edition, Sweet & Maxwell Asia, Singapore.
Fong, L.C. (2004b). The Malaysian PWD Form of Construction Contract, Sweet & Maxwell Asia, Petaling Jaya.
Ismail, N. (2007). Performance Bond and An Injunction, Master's Project Report (Dissertation), Universiti Teknologi Malaysia.
Jabatan Kerja Raya (1988). A Guide on the Administration of Public Works Contracts, Ibu Pejabat JKR Malaysia.
Martin, E.A. (2003). A Dictionary of Law, 5th Edition reissued with new covers, Oxford University Press, Oxford.
Murdoch, J. and Hughes, W. (2000). Construction Contracts – Law and Management, 3rd Edition, Spon Press, London.
Radhakrihnan, S. (1999). Legal Aspects of Insurance for Engineering Projects, Article,  1 MLJ cxxx;  1 MLJA 130.
Robinson, N.M., Lavers, A.P., Heng, G.T.K. and Chan, R. (1996). Construction Law in Singapore and Malaysia, Second Edition, Butterworths Asia, Singapore.