Supardi, Azizan and Yaakob, Jamaluddin and Adnan, Hamimah (2009): Performance bond: conditional or unconditional. Published in: Construction Industry Research Achievement International Conference (3 November 2009)
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Abstract
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, as stated by Nigel M Robinson et. al. in his book, Construction Law in Singapore and Malaysia. He further added that there are two types of performance bonds: Conditional bond or default bond; and Unconditional bond or on-demand bond. However, in Malaysia, for the past 20 years and since the famous case of Teknik Cekap Sdn Bhd v Public Bank Berhad [1995] 3 MLJ 449 to the recent Suharta Development Sdn Bhd v United Overseas Bank (M) Bhd & Anor [2005] 2 MLJ 762, 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 |
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Original Title: | Performance bond: conditional or unconditional |
English Title: | Performance bond: conditional or unconditional |
Language: | English |
Keywords: | Performance Bond; Guarantees; Conditional; Unconditional |
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 |
Item ID: | 34007 |
Depositing User: | Azizan Supardi |
Date Deposited: | 10 Oct 2011 10:43 |
Last Modified: | 05 Oct 2019 22:15 |
References: | 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. P.W.D. Form 203A (Rev. 10/83) Standard Form of Contract to be Used Where Bills of Quantities Form Part of the Contract. Radhakrihnan, S. (1999), Legal Aspects of Insurance for Engineering Projects, Article, [1999] 1 MLJ cxxx; [1999] 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. Yaakob, J. (2005), Performance Bond in Construction Contract: Problems with Drafting & Calling the Bonds, Seminar paper, Issues on Non-Performance of Construction Contract, UTM, Skudai, Johor. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/34007 |
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