• Commercial Disputes:  Specific Performance
  • December 15, 2014 | Author: Kenra Parris-Whittaker
  • Law Firm: Parris Whittaker - Freeport Office
  • What’s the background to this case?

    The contractor had a contractual obligation to provide its employer with a collateral warranty. That warranty survived termination of the contract. The court therefore ordered the contractor to obtain the collateral warranties from a third party - even though the third party was insolvent and had been dissolved. However, there was evidence it may have had professional indemnity insurance in relation to claims under the collateral warranties.
     
    Whilst the contractor was also required under the contract to provide a performance bond, this was not enforced by the TCC as it was not possible in the circumstances to provide the bond. The TCC therefore ruled that an order for specific performance in relation to the obligation to provide a performance bond could be made by way of substituted performance. Here, the court made an order for substituted performance, by way of a payment into the court of £420,000 (which would be equivalent to the provision of the bond).
     
    Notably, the contractor had used its best endeavours to obtain a performance bond, demonstrating in a practical way that it was not possible to secure the performance bond. The TCC, demonstrating flexibility in finding a workable and fair solution, then essentially ‘found’ another method through substituted performance.
     
    The ruling shows that collateral warranties will be robustly enforced by the courts where there is a prospect that the order can, in practice, be performed. Commercial parties are advised to check their contractual obligations in light of the ruling - particularly where future disputes could arise.
     
    What does this mean?

    It is essential that all contractual obligations such as collateral warranties are complied with as far as possible and as early as possible. In the event of later difficulties in complying with a contractual obligation, the court may order specific performance in alternative ways.
     
    How can we help?

    For expert, strategic legal advice on commercial disputes, and contract terms including collateral , contact the Bahamas lawyers at ParrisWhittaker now for urgent advice.
     
    (1)Liberty Mercian Ltd v Cuddy Civil Engineering Ltd and others [2014] EWHC 3584 (TCC)