Construction Contracts in UK Law

The court will not grant an injunction in either case unless there has been a lack of good faith. The justification for this lies in the commercial purpose of the bond. Such a bond is, effectively, as valuable as a promissory note and is intended to effect the 'tempo' of parties' obligations, in the sense that when an allegation of breach of contract is made (in good faith), the beneficiary can call the bond and receive its value pending resolution of the contractual disputes.

Precisely the same effect is achieved by those contracts which incorporate paragraph 9.2 of the Scheme for Construction Contracts. That provides that an adjudicator must resign where the dispute is the same or substantially the same as one which has previously been referred to adjudication and a decision has been taken in that earlier adjudication. As Dyson LJ observed in Quietfield Ltd v. Vascroft Construction Ltd. [2007] BLR 67 at paragraph 45

If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.

An unexpressed term can be implied if and only if the Court finds that the parties must have intended that term to form part of their contract: it is not enough for the Court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them: it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, though tacit, formed part of the contract which the parties made for themselves.

It defies commercial common sense to think that this, among all other such obligations, was the only one which the parties intended should not be secured. Had the parties intended this surprising result I would have expected the contracts and the bonds to have spelt this out clearly but they do not do so.

Those authorities are to the effect that it is implicit in the nature of a performance bond that, in the absence of some clear words to a different effect, when the bond is called, there will at some stage in the future be an "accounting" between the parties to the contract of sale in the sense that their rights and obligations will finally be determined at some future date.