Record Details

Doubts raised on the validity of construction and payment guarantees

Acta Structilia

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Title Doubts raised on the validity of construction and payment guarantees
 
Creator Maritz, T
 
Subject Building industry, guarantees, performance, risk management, securities
 
Description It has become common practice in the building industry for contractors to provide employers with a construction guarantee. These guarantees, whichare defined as being on call or on demand, usually provide that a  certificate issued by the agent or the principal agent will provide conclusive proof that the employer is entitled to call in the guarantee (Fenster, 1998). In a number of recent decisions, such a conclusive proof provision has been the subject of judicial scrutiny, and there is now an ever-increasing doubt as to the validity of these guarantees.The Joint Building Contracts Committee (JBCC) 1991 suite of contracts was the first in South Africa to introduce the concept of construction and payment guarantees that provided the requisite cover available on call from approved financial institutions. In the process the construction guarantee replaced the performance guarantee (surety) that prevailed in addition to the retention fund in construction contracts. Various standard forms, which embodied the terms and conditions of the guarantees, were prepared for this purpose by the JBCC. These terms and conditions had been negotiated by the JBCC with the legal/technical committees of the banking and insurance institutions and were fully approved by them. However, for some time now concerns have been raised regarding the difficulties experienced in getting all banks and/or their property finance divisions to comply with the JBCC guarantees. Because the construction and payment guarantees are so closely linked to the terms and conditions  of the JBCC principal and nominated/selected subcontract agreements, changes made to the pro forma guarantees or agreements, which disturb the risk of the guarantor, could very well render the guarantee null and void. This article will report the interpretation of construction and payment guarantees as held in recent court decisions, the findings of an investigation conducted on perceived problems being experienced by the South African construction industry with regard to these guarantees, and will present what is considered to be best practice to ensuring the continued effective use thereof.Keywords: Building industry, guarantees, performance, risk management, securitiesDeesdae is dit algemene praktyk vir aannemers in die boubedryf om aan bouhere ’n konstruksiewaarborg te voorsien. Hierdie waarborge, wat gedefinieer word as beskikbaar op aanvraag of oproep, voorsien gewoonlik dat ’n sertifikaat wat deur die agent of die hoofagent uitgereik word afdoende bewys sal wees dat die bouheer geregtig is om die waarborg op te roep (Fenster, 1998). In ’n aantal onlangse hofuitsprake het hierdie ongekwalifiseerde toepassing van oproepbaarheid in gedrang gekom weens regterlike ondersoeke en daar bestaan nou ’n groterwordende twyfel oor die geldigheid van hierdie waarborge.Die Gesamentlike Boukontraktekomitee (GBK) se 1991-kontraktestel was die eerste in Suid-Afrika om die konsep van konstruksie- en betalingswaarborge in te stel. Hierdie waarborge verskaf die vereiste dekking wat, wanneer dit benodig sou word, deur goedgekeurde finansiële instellings beskikbaar gestel word. Hiermee is die prestasiewaarborg (borgakte), wat naas die retensiefonds algemeen in konstruksiekontrakte in gebruik was, deur die konstruksiewaarborg vervang. Die GBK het verskeie standaardvorms, wat die terme en voorwaardes van die waarborge omvat het, vir hierdie doel voorberei. Die GBK het op ‘n deurlopende grondslag met die regs- of tegniese komitees van die bank- en versekeringsinstansies oor gemelde terme en voorwaardes onderhandelinge gevoer ten einde hulle volle goedkeuring en die ongekwalifiseerde toepassing daarvan te verseker. Daar word egter reeds vir ’n geruime tyd kommer uitgespreek oor die probleme wat ondervind word om te verseker dat al die banke en/of hul eiendomfinansieringsafdelings die terme en voorwaardes van die GBK-waarborge nakom. Omdat die terme en voorwaardes van die konstruksie- en betalingswaarborge ten nouste verbind is met dié van GBK se hoof boukontrakooreenkomste en genomineerde of geselekteerde subkontrakooreenkomste, mag wysigings aan die pro forma-waarborge en-ooreenkomste – wat verband hou met die risiko van die waarborggewer –daartoe lei dat hierdie waarborge van nul en gener waarde is.Onlangse hofbeslissings met betrekking tot die interpretasie van konstruksie- en betalingswaarborge en bevindinge van ‘n ondersoek na beweerde probleme wat deur die Suid-Afrikaanse konstruksiebedryf ondervind word met betrekking tot die waarborge word in hierdie artikel rapporteer, en ‘n beste praktyk riglyn om te verseker dat hierdie waarborge steeds effektief gebruik word, word voorgestel.Sleutelwoorde: Boubedryf, waarborge, prestasie, risikobestuur, sekuriteit
 
Publisher University of the Free State
 
Contributor —
 
Date 2012-05-31
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier https://www.ajol.info/index.php/actas/article/view/77165
 
Source Acta Structilia; Vol 18, No 1 (2011); 1-26
2415-0487
1023-0564
 
Language eng
 
Relation https://www.ajol.info/index.php/actas/article/view/77165/67621
 
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