The Best Moments in My 30+ Years on Construction Disputes and Claims Advisory (Performance Bond and Termination)
The position at law in preventing a call of an on-demand bond is challenging. Anybody most probably can get an injunction as long as they are willing to guarantee payment if they are in default and this is normally done by escrow in court. This is only temporary and but does stop the payment temporary until the case is ventilated as to whether there is probable cause to invalidate the PG.
98% of the case, it is just a delay tactic. Most of the time is to give the claimant lawyers time to do research on caselaw and statues to see if there is the 2% chance of winning.
Normally there is none and the injunction can be easily lifted by virtue of the on-demand characteristic. I have seen such injunction lifted within not more than 3 months after being served. So only useful as a delay tactic but very rarely successful.
To the lawyers, it is good money as all they have to do is put up some creative legal reasoning on dubious grounds. Something claims professionals cannot do as filing for an injunction in court is the domain of registered local lawyers. They know it and charge you very heavily for such services.
My best moments in my career after some 30+years is on the PG and termination.
Better to try what I did for a Client 16 years ago on a large road infrastructure project in Kerala. I purposely angered the Owner’s Contract Administrator to such an extent that he forgot to notice that the PG is near expiry. He was so determined to terminate our Contract.
Coincidentally and to our benefit, the court vacation period was also coming up. Just a day before expiry we moved all our plant, equipment and materials from the site to another state nearby. The removal was done quietly in the middle of the night. On the day of the expiry we invoke the expiry of the non payment clause for payment (which an earlier notice was sent in preparation) of the the last progress payment and walked away.
Saved a ton of money from the non seizure of plant, equipment and materials which the employer is entitled to do and the impossibility of the calling on the PG as it has expired.
This is what I would call ‘thinking out of the box” and strategizing on what is a very TOXIC environment on site which has been demonstrated by the over zealous contract administrator.
I have done a similar move on another multi million building contract in Malaysia where the PG was also near expiry by the time we decided to walk away. After that it is waiting and keeping our finger crossed and as the circumstances repeated itself, we terminate first and walk away in very military fashion.
Sometimes, the best approach is the KISS approach.
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Cheers, Happy Reading and Wishing you Good Health Always.