Fasda Heights Sdn Bhd v Soon Ee Sing Construction Sdn Bhd [1999]

Fasda Heights Sdn Bhd v Soon Ee Sing Construction Sdn Bhd [1999]

In this case the developer (plaintiff) had terminated the contract of a contractor after it was claimed the contractor (first defendant) had failed to execute the works correctly and had failed to rectify defects in accordance with the Architects instructions. Subsequently the Developer issued a letter of demand to the bank (second defendant) who had issued a performance guarantee on behalf of the first defendants performance of the contract.

The plaintiff was now seeking the court to hold that the second defendant should pay the sums stated in the performance guarantee as a result of the fist defendants failure in respect of the contract. The first defendant claimed that the performance guarantee was conditional on the contractor breaching contract together with the demand was made after the expiry of the bond and after termination of contract which they further claimed prevented the plaintiff from calling on the guarantee.

The Court held that the demand had stated that the contractor was in default of the contract and had been in writing and that this demand satisfied the conditions for the bank to release payments against the guarantee.

The Court held that the demand issued in July 1998 was before the expiry of the performance bond which was clearly stated as remaining in place until one month after the issuance of completion certificate by Architect.

The Court held that the termination of the Contract did in no way effect the validity or otherwise of the performance guarantee.

Fasda Heights Sdn Bhd v Soon Ee Sing Construction Sdn Bhd 1999