Performance Bonds: A Chink In The Armour?

Described as the "life-blood of international commerce", irrevocable payment obligations undertaken by banks through the issue of performance bonds appear potentially less immune from interference by the courts following the Technology and Construction Court's ruling in Simon Carves Ltd v Ensus UK Limited¹.

This ruling challenges the established view that a court will only interfere in a beneficiary's right to make a demand under a performance bond where there is clear evidence of fraud by concluding that a court can also intervene where it feels that there is a "strong case" that a call on the performance bond would amount to a breach of an underlying contract.

Nature of a Performance Bond