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JCT 2016: DB performance bond

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What happens if the Contractor has not provided the performance bond while the project already on site and has completed 2/3 of the programmed works?
asked Jun 21, 2019 in General by e9671210 (120 points)  

1 Answer

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For whatever reason this matter seems to have been overlooked but I assume that the Contractor is able to provide a Performance Bond rather than not being able to procure one, for whatever reason.

If you have already discussed this then you could refer the matter to adjudication by serving a notice under clause 9.4.1.  If the Adjudicator makes a decision in your favour, effectively for specific performance, then you could refer the matter to the courts to be enforced., if necessary.

In the case of Liberty Mercan Ltd v Cuddy Civil Engineering Limited [2014] EWHC 3854 (TCC), Cuddy had used their best endeavours to procure a bond but it was considered as too much of a risk by the market.  The courts ordered Cuddy to make a payment to the courts, who would effectively act as the Bondsman.

You could also discuss the possibility of the Contractor paying retention monies if performance is a concern.  This would need to be a Deed of Variation to the contract, although would replace the obligation to provide a Performance Bond.  If such a requirement is not needed at this stage then you could  negotiate the payment of a sum of money instead (cost of Bond) which you would probably implement as a Deed of Variation as this would not constitute a Change under clause 5.1.
answered Jul 4, 2019 by Andrew W-I Panel Member (25,580 points)