Spiersbridge Property Ltd v. Muir Construction [2008] ScotCS CSOH_44 (14 March 2008)

Spiersbridge Property Ltd v. Muir Construction [2008] ScotCS CSOH_44 (14 March 2008)

Where a demand has been made on a performance bond in an amount which is ultimately found to exceed the sum due to the party making the demand, that party is obliged to account for that excess to the opposite contracting party (here, the defender), not to the bank. The appropriate implied term is in the building contract, not the bond or banking contract.

Citation
[2008] ScotCS CSOH_44
Parties
Pursuer: Spiersbridge Property Developments Limited; Defender: Muir Construction Limited
Jurisdiction
Scotland
Judgment Date
14 March 2008
Procedural Posture
Commercial Building Contract Dispute / Interlocutory Judgment on Legal Issue Before Proof
Outcome
Pursuer's plea in law on the bond repayment issue repelled; amendment to counterclaim allowed.
Legal Topics
Performance Bonds, Implied Terms, Restitution of Overpayment, Building Contracts
Contract Law Construction Law Performance Bonds Implied Terms Restitution of Overpayment Building Contracts

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Parties

Spiersbridge Property Developments Limited

Pursuer

Muir Construction Limited

Defender

Procedural Posture

Commercial Building Contract Dispute / Interlocutory Judgment on Legal Issue Before Proof

Legal Issues

  1. 1 Whether, when a performance bond is called and payment made in excess of actual loss, the beneficiary must account for the excess to the bank or to the opposite contracting party
  2. 2 Whether a term to account for excess must be implied into the building contract, the bond contract, or the banking contract

Ratio Decidendi

Where a demand has been made on a performance bond in an amount which is ultimately found to exceed the sum due to the party making the demand, that party is obliged to account for that excess to the opposite contracting party (here, the defender), not to the bank. The appropriate implied term is in the building contract, not the bond or banking contract.

Court Disposition

Pursuer's plea in law on the bond repayment issue repelled; amendment to counterclaim allowed.

Orders

  • Pursuer must account to the defender for any excess received under the performance bond beyond actual loss.
  • Minute of Amendment to the Counterclaim allowed.