Clifford Chance
Singapore Court Examines Calls on On-Demand Performance Bonds for Construction Projects
25 June 2020
On-demand performance bonds (also known as unconditional or demand bonds) are tools commonly used in construction projects to provide the beneficiary with a form of security which is promptly realizable upon a party's non-performance of its obligations.
Singapore law recognises two exceptions to a party's ability to call on such performance bonds: fraud and unconscionability. The latter, seemingly easier to prove than fraud and applicable to a wider variety of factual circumstances, is often raised by applicants seeking to injunct calls on on-demand bonds.
In two recent judgments, the Singapore High Court affirmed the high threshold for establishing unconscionability and provided further clarity on the scope of the exception.
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