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Performance Guarantee

On 24th November 2022, the Court of Appeal heard an appeal filed by the Appellant premised on the following factual backdrop:

  1. The Appellant appointed the Main Contractor to carry out construction works (“Main Contract”).
  2. The Main Contractor had repeatedly breached the Main Contract. As such, performance guarantees were executed between the Appellant and Respondents (i.e. Directors of the Main Contractor), where the Respondents guaranteed to pay to the Appellant a certain sum on demand for the due and proper performance of the Main Contract (“Performance Guarantee”).
  3. The Main Contract was effectively determined 2 years ago. The Appellant proceeded to enforce the Performance Guarantee and demanded each Respondent to pay the guaranteed sum. Since the Appellant’s demand was not complied with, a suit was filed at the High Court.
  4. The Respondents filed an application for a summary disposal pursuant to Order 14A of the Rules of Court 2012 (“O14A Application”).
  5. The High Court Judge determined that the O14A Application in favour of the Respondents. The Appellant appealed.

After hearing submissions from both parties, the Court of Appeal agreed with the Appellant that the Performance Guarantee is an unconditional and on-demand guarantee whereby the Appellant is not required to prove any default by (or obtain a judgment against) the Main Contractor before enforcing the Performance Guarantee against the Respondents.

Accordingly, the Court of Appeal allowed the Appellant’s appeal and set aside the High Court’s decision.

The Appellant was successfully represented by Derrick Oon (Partner) from Nazreen Oon & Partner’s dispute resolution practice.