The contractor shall not be obliged to extend the performance security whenever requested by the Ordering Party

Recently, one of our Clients, who is a contractor for a contract to carry out drilling, surveying and probing for the purpose of determining geological and engineering conditions for the construction of a road, approached us following repeated calls from the Ordering Party to submit a continuation of the performance bond. In the summonses, the Ordering Party indicated that the need for the continuation of the performance bond was due to, among other things, the fact that construction work was being carried out on the road section for which the geological and engineering conditions had been determined by our client.

After a detailed analysis of the documents and the legal situation, the Law Firm’s advocates prepared a response in which they pointed out the unreasonableness of the Ordering Party’s request resulting in the refusal to submit the continuation of the performance bond to the Ordering Party.

In the body of the letter, it was pointed out in particular that:

• the Ordering Party had not changed the form of security, despite the fact that it was entitled to do so under the contract;
• the Ordering Party, as the author of the contract, was responsible for its content and bore the consequences related to the drafting of its provisions;
• the warranty provisions of the contract were drafted in a manner unfavourable to the Ordering Party, since the contractor’s consent was required for the warranty period to be extended;
• the purpose of the performance bond is to secure the Ordering Party’s claims during the warranty period and, due to the expiry of the warranty period, there is no basis for extending it.

The Ordering Party acknowledged the argumentation of the lawyers of the Law Firm and refrained from making any further demands regarding the extension of the performance bond.

Thanks to the experience and knowledge of the lawyers of the Law Firm, the Client is not obliged to extend the performance bond for another period of more than one and a half years, which allowed him to avoid the related costs.