Tag archives: Guarantee

Principal debtor can rectify guarantee between guarantor & beneficiary

By Patrick Bracher (ZA) on July 16, 2019 Posted in Insurance

The Western Cape High Court held that the principal debtor (in this case the contractor under a building contract) can apply to court to rectify a guarantee between the guarantor (an insurer) and the beneficiary under the guarantee (the employer) where the contractor had given a counter indemnity to the insurer. A guarantee contract is … Continue reading

Prescription under performance bond commences on demand

By Patrick Bracher (ZA) on July 10, 2019 Posted in Insurance

Where an insurer provided a performance bond/guarantee in which it undertook to pay ‘on receipt of a written notice from the seller’ saying that the purchaser had defaulted, it was held that extinctive prescription only started to run when demand for payment was made even though three years had passed since the default event. The … Continue reading

Fraud as a defence to payment under a guarantee

By Patrick Bracher (ZA) on March 25, 2019 Posted in Insurance

The guarantor in Raubex Construction (Pty) Ltd v Bryte Insurance Company alleged that payment under a guarantee was not due because of fraud on the part of the beneficiary. A mere error, misunderstanding or oversight, however unreasonable, does not amount to fraud and is insufficient to show that the contentions of the beneficiary are deliberately … Continue reading

Good faith requirement in a guarantee

By Patrick Bracher (ZA) on May 13, 2018 Posted in General

Where a retention guarantee was provided to a construction company for an amount to be demanded but not exceeding ‘a good faith estimate of the costs’ claimed, the contractor had to show that the demand was made in the honest belief that it was a correct estimate of what it was entitled to be paid … Continue reading

Interpretation of contracts – guarantees

By Patrick Bracher (ZA) on June 14, 2016 Posted in Drafting tips

In resolving the question whether a guarantee was a call guarantee or a conditional guarantee the Supreme Court of Appeal in Mutual & Federal v KNS Construction restated what has been said before about interpreting documents. The interpretative process is one of ascertaining the intention of the parties – what they meant to achieve. And … Continue reading

A conditional performance guarantee is akin to a suretyship

By Patrick Bracher (ZA) on June 14, 2016 Posted in Insurance

A performance guarantee relating to a building contract included language stating that it was issued for the ‘due fulfilment’ by a sub-contractor of its obligations. The guarantee also stated that the amount was payable on receipt of a written demand made by the main contractor ‘if (in your opinion and at your sole discretion) the … Continue reading

Guarantees and suretyships may be guarantee policies and therefore unlawful

By Patrick Bracher (ZA) on May 22, 2015 Posted in Insurance

A surety does not usually operate a business providing security at a price nicely determined according to the assessed likelihood of the risk occurring. That is what insurers do. Fusion Underwriting Guarantees Agency provided suretyships, called guarantees, as performance guarantees to contractors performing work on behalf of employer municipalities. Before doing so Fusion required a … Continue reading

Liability under demand guarantees is absolute and unconditional (unless fraud)

By Patrick Bracher (ZA) on February 6, 2014 Posted in Banking, Insurance

The guarantor must pay on demand The appeal court has reaffirmed that an undertaking to make payment on receipt of a first written demand under a guarantee (in this case a construction guarantee) must be honoured by the guarantor as an autonomous obligation without question unless a fraud is being committed on it. An on-demand … Continue reading