The problems and abuse of performance bond in the construction Industry

3rd International Conference on Research Methodology for Built Environment and Engineering 2017

生态环境科学

Hassan, A.A.^1 ; Adnan, H.^1

Faculty of Architecture, Planning and Surveying, Universiti Teknologi MARA, Selangor, Shah Alam

40450, Malaysia^1

关键词: Banking institutions;    Deductive reasoning;    ITS applications;    Legal research;    Legal system;    Performance bond;    Project delivery;    Third parties;   

Others  :  https://iopscience.iop.org/article/10.1088/1755-1315/117/1/012044/pdf
DOI  :  10.1088/1755-1315/117/1/012044

学科分类：环境科学（综合）

来源: IOP

【 摘 要 】

Performance bond is a bank-origin system adopted in the construction industry to act as a tool to ensure project delivery. The bond is taken up by an obliging party with endorsement by a third party; normally a banking institution, which would warrants the release of an insured amount should the obliging party fails to complete the contracted work on time or as agreed. The nature of the instrument is said to be perplexed and abusive. The research aims to investigate this claim. Applied legal research using both doctrinal and non-doctrinal legal research is employed. With the application of deductive reasoning, the data is processed and summarized. It is found that the term bond and guarantee, which are used intermittently but equivocally by the parties, should be distinguished accordingly to its obligation values, or otherwise would trigger major disputes. Interpretation, drafting and liabilities issues caused by archaic language and dated recycled wordings in the contracts contributed nothing to the convenience and application of this instrument. The loopholes in the contract made it easy for suspected fraudulent calls to be made by the beneficiary, whom are normally, the client. With several trusted professional bodies discouraged the use of this instrument, the legal system is compelled to provide direction to ensure continuous utilization of this project delivery assurance mechanism. Standardized system and structure is vital in order to obtain uniformity in its application.