In January 2026 the High Court dealt with a case for enforcement by the beneficiary of an advanced payment guarantee. A number of issues were raised, one of which was an argument that because the underlying construction contract was cancelled, it followed that the performance guarantee was cancelled. The argument was rejected.
The court held that it is a trite principle that if a contractor is in breach with the employer, the employer can ask for specific performance and/or cancellation. If excused from further performance, the contractor will still be liable for damages. In regard to a defence raised by the surety, it is also trite that the cancellation of a building contract does not automatically cancel the performance guarantee, due to the autonomy principle which treats the guarantee as an independent, on-demand undertaking for payment. The guarantee is wholly independent of the underlying contract.
The court rejected a defence that the beneficiary had committed a fraud. There was no evidence of fraud.
Judgment of R11 547 075 was granted against the insurer that issued the guarantee. The insurer in turn was successful in a claim against a party who signed a deed of suretyship and indemnity for the guaranteed amount.