n SA Mercantile Law Journal = SA Tydskrif vir Handelsreg - Construction of demand guarantees gone awry : Minister of Transport and Public Works v Zanbuild Construction : case note
|Article Title||Construction of demand guarantees gone awry : Minister of Transport and Public Works v Zanbuild Construction : case note|
|© Publisher:||Juta Law Publishing|
|Journal||SA Mercantile Law Journal = SA Tydskrif vir Handelsreg|
|Affiliations||1 University of South Africa|
|Publication Date||Jan 2013|
|Pages||404 - 417|
The term 'construction guarantee' is generally used to describe a primary (independent) undertaking given by a guarantor (often a bank) to a third party (beneficiary) in respect of obligations of a principal (bank's customer) to that third party (beneficiary). The guarantor of this type of undertaking promises or gives a primary (independent) or direct undertaking to perform in accordance with the guarantee, irrespective of whether or not the principal's (customer's) obligation is enforceable. However, in Minister of Transport and Public Works, Western Cape, and Another v Zanbuild Construction (Pty) Ltd and Another 2011 (5) SA 528 (SCA), a case involving 'two construction guarantees' - one for R1 181 104, 80 and the other for R1 106 500 - the Supreme Court of Appeal illustrated that it is not the name or label (title or heading) that is given to a payment obligation or undertaking (instrument) that determines whether it is accessory or independent in nature, but rather its substance and construction that does.
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