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Building Disputes – Security for Performance

Security for Performance

Security for performance is a way for the parties to a construction contract to protect themselves from the other party’s default. The security can take a number of forms, such as a cash deposit, a bank guarantee, or an insurance bond.

If the party providing the security defaults on the contract, the other party can usually access the security. This can help to protect the other party from financial loss.

Disputes can sometimes arise about whether or not a party has defaulted on the contract. If this happens, the party with the benefit of the security may seek to access the security before the dispute is resolved. This can make the dispute more difficult to resolve.

In some cases, a party may be able to obtain an injunction from the court to prevent the other party from accessing the security. This is usually only possible if the party seeking the injunction can show that the other party is likely to default on the contract and that the party seeking the injunction will suffer irreparable harm if the security is accessed.

Here are some additional tips for managing security for performance in construction contracts:

  • Make sure that the contract clearly sets out the terms of the security.
  • Require the party providing the security to maintain the security in good standing.
  • Monitor the party’s performance under the contract to make sure that there are no signs of default.
  • If a dispute arises, seek advice from Mullane & Lindsay’s litigation and dispute team as soon as possible.

Disputes can arise about the duties and obligations of an agent; for further information please contact David Collins or Kristy Nunn from our dispute resolution and litigation team.

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