Court construes bond based on ABI Model Form

Court construes bond based on ABI Model Form

In Yuanda v Multiplex [2020] EWHC 468 (TCC), the Technology and Construction Court held that a bond, based on the ABI Model Form of Guarantee Bond, was a performance bond and not an on demand bond. It also held that an adjudicator’s decision (as to the sub-contractor’s liability to the contractor for delay damages) would be sufficient to establish liability to pay under the bond.

What are the practical implications of this case?

The case provides an example of the court construing security to determine whether it is an on demand bond or a performance bond. More information on the differences between these two types of bond can be found in Practice Notes: Performance bonds—construction projects and  On demand performance bonds—construction projects. The finding that the bond in question was a performance bond was not surprising, and the court had reached the same conclusion in respect of a bond based on the ABI Model Form in Ziggurat v CC International [2017] EWHC 3286 (TCC).

The ruling also indicates that, where a performance bond requires the amount of damages to be established in accordance with the underlying contract, a valid adjudication decision may well be sufficient for this purpose (depending on the breach in question).

What was the background?

Multiplex, the main contractor on the ‘One Blackfriars’ tower project in London, appointed Yuanda as its sub-contractor under a JCT Design and Build Sub-Contract 2011. Yuanda provided a bond to Multiplex based on the ABI Model Form of Guarantee Bond. The sub-contract works were delayed and Multiplex commenced an adjudication against Yuanda seeking to recover substantial liquidated and ascertained damages (LADs) for delay levied against it by Multiplex’s em

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About the author:

Jon is Head of the Built Environment Group at Lexis®PSL.

Jon trained at Hogan Lovells and qualified into the firm's construction disputes team. Jon has experience of acting for various parties in relation to disputes arising out of construction and engineering projects in various jurisdictions. Jon has acted for clients in TCC litigation, arbitration, adjudication and mediation as well as providing advice on various aspects of construction and engineering projects.