Bonds and Guarantees

Due to the risks and large sums of money involved in many construction contracts, most parties want and need to have some form of security in place in relation to their project. An employer, for example, will typically want to ensure that the project is completed properly, and that there is a remedy available if the contractor becomes insolvent or defaults on the contract in some other way. Similarly, the contractor will usually want to ensure that adequate financing is available for the entire project.

Security is often given in the form of a bond (a promise by deed whereby the issuer of the bond undertakes to pay to the beneficiary a sum of money) or a guarantee (an undertaking by the guarantor to the beneficiary to accept liability for any failure on the part of a third party to perform existing and future legal obligations).

Particular care and skill is needed in drafting the documents to make sure that the wording fulfils the purpose for which the security is needed and is consistent with the underlying contract. Poor drafting or timing can jeopardise the security of the bond or guarantee, risking substantial sums of the client's money.

Members of Keating Chambers offer exceptional expertise in drafting, advising and providing representation for their clients in respect of security. Current and recent cases in which members have been involved include:

acting for an employer on a power plant project in resisting an application for a freezing injunction in respect of bond proceeds
acting for a contractor on a prison project in obtaining an injunction preventing a surety from paying out and preventing the beneficiary from receiving or dealing with the proceeds of a bond
advising on the appropriate terms of a bond for an office development project in London Docklands
advising on the appropriate calls to be made on bonds provided by a contractor for a large power station project in the Far East
advising a foreign bank on its ability to call a bond when a contractor defaulted on its headquarters office project
advising a contractor on its ability to prevent and preventing payment on a bond on an infrastructure project in the Far East.

As well as advising clients on their legal position in a dispute, members of Chambers represent clients in court proceedings relating to bonds, ranging from applications for injunctions to restrain calls on bonds to full litigation. The experience which our members have gained by appearing in cases affecting the law on interpretation of bonds means that we can offer our clients the highest quality assistance in such cases.

Further Information
For further information on how our members can assist you, please contact the Senior Clerks, John Munton and Nick Child, in the first instance, on +44(0)20 7544 2600. They and their teams of Clerks will be pleased to advise you on the member of Keating Chambers appropriate to your requirements.