Tag archives: Guarantee

Fraud as a defence to payment under a guarantee

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

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

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

Guarantees and suretyships may be guarantee policies and therefore unlawful

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)

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