The beauty of an on demand bond or standby letter of credit is that the beneficiary can call the security instrument and pocket the money without having to prove that the contractor (or sub-contractor) is actually in default or owes the money. It is a separate, independent agreement between the beneficiary and the provider of the security, often a bank, which creates a primary obligation on the bank to pay out on first demand. Continue reading
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“Mens rea” in calls under on demand security instruments
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What notice? Did I forget something?
Given the “draconian consequences” of getting the timing under the Construction Act 1996 wrong, I can only imagine what a sinking feeling a party must experience when it realises that it hasn’t served a payment or pay less notice on time. In Kersfield Developments (Bridge Road) Ltd v Bray and Slaughter Ltd, it is likely to have happened to the employer’s agent on a Friday evening one day late last summer.
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Employer couldn’t recover overpayments made to contractor
The Court of Appeal’s decision in Graham Leslie v Farrar Construction Ltd concerned whether an employer could recover a £300,000 overpayment for build costs made to a contractor. While the principles the court applied are well-established and generally uncontroversial, the outcome – that the employer could not recover the overpayment – may be surprising to many operating in the construction industry. Continue reading
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Paying your fair share: when can an adjudicator decide more than the notified sum must be paid?
Kersfield Developments (Bridge Road) Ltd v Bray & Slaughter Ltd is the latest authority in a line of cases providing guidance on interim payments in construction contracts under the Construction Act 1996.
While a wide number of arguments were deployed in the case, perhaps the most interesting point for construction practitioners is that it offered the first judicial guidance on the meaning and effect of sections 111(8) and (9) of the Construction Act 1996. Continue reading