Constructing safety nets (2014) 25 9 Cons.Law 17 [Archived]
Constructing safety nets (2014) 25 9 Cons.Law 17 [Archived]

The following Construction practice note provides comprehensive and up to date legal information covering:

  • Constructing safety nets (2014) 25 9 Cons.Law 17 [Archived]
  • Key points
  • My word is my bond?
  • The substance of the instrument
  • The weight of the presumption
  • Are we there yet?

This article appears as originally published in Construction Law on 1 October 2014 and is not maintained.

Many contractors may still be tendering for work at negative margins, possibly operating one major dispute away from the brink. Barrister, Ebony Alleyne of Hardwicke examines the common forms of security used by employers to safeguard performance by contractors and/or protect against insolvency.

Key points

  1. despite signs of an upturn in construction the risk of contractor insolvency remains

  2. traditional forms of informal security can give rise to significant disputes surrounding categorisation and interpretation

  3. the apparent desirability of a performance bond must be examined in light of the risk that recovery may prove costly and time-consuming

  4. the appropriate financial instrument (if any) should be determined by reference to the degree of risk being taken

  5. the category, effect, cost to implement and enforceability of the instrument all warrant careful consideration

  6. a conceptual shift to focus on more robust vetting and monitoring processes may be required

An improving economy has markedly revived the construction industry in recent times. Increases in public and private sector infrastructure expenditure and support for the real estate market precede a further reduction in corporation tax due in April 2015 and the insolvency statistics, see The Insolvency Service: Insolvency Statistics – April to June 2014 (Q2 2014)) for Q2 2014 show a decrease in company liquidations, administrations and voluntary

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