Cases - Perar BV v General Surety and Guarantee Co Ltd

Record details

Name
Perar BV v General Surety and Guarantee Co Ltd
Date
(1994)
Citation
66 BLR 72 CA
Keywords
Insolvency
Summary

Percy Trentham Ltd. ('Trentham') entered into a JCT 1981 contract to design and build a building. Clause 27.2 provided for automatic determination of the contract in the event that Trentham became insolvent, e.g. if it had an administrative receiver appointed. Trentham provided a bond to the employer. It was a condition of the bond that Trentham was in breach or default. Further, the bond provided that

'if the Contractors shall well truly and faithfully comply with all the terms and conditions of the said Contract on their part to be kept and performed so far as the same are legally enforceable against them ...[the obligation under the bond] shall be null and void...'.

Trentham entered administrative receivership. Trentham's contract was automatically determined. The employer sought to make a claim on the bond.

It was held by the Court of Appeal that clause 27 provided a code for what should happen on the insolvency of the contractor. Clause 27.2 provided for automatic termination. Clause 27.4 set out the obligations on the contractor (e.g. to provide drawings) and the rights of the employer (e.g. to employ others to complete the works) after automatic termination. The contractor had no obligation to continue the works after automatic termination. It was a condition of the bond that there must be some breach of contract on the part of the contractor. Here there was no breach following automatic termination and the extinguishing of any obligation to complete the works. The employer had no claim against the surety under the bond.