Court Can Act As Bondsman And Require Contractors To Procure Warranties Through Specific Performance

We come across situations sometimes where contractors agree to enter into contract with clients, with a form of bond or collateral warranty attached to the contract. The contract is signed and works commence on site. Both the contractor and the client are well into the project. The contractor then fails to procure a bond and fails to procure collateral warranties from its sub-consultants (which were in fact under the contract). The client requests the performance bond from the contractor. The contractor procrastinates and starts negotiating with the client on the form of bond to be used. By this point this has become a commercial issue for the client. The client is now also concerned that the contractor has not procured the collateral warranties from its key designers. The contract is terminated for other reasons. The Liberty Mercian Limited v Cuddy Civil Engineering Limited, Cuddy Demolition and Dismantling Limited cases seek to protect a client in a similar position. There have so far been three cases in total in front of Mr Justice Ramsey between these two parties. In the first two cases, the court found that a contract existed between Cuddy Civil Engineering Limited ('Cuddy') and Liberty Mercian Limited ('Liberty Mercian'). The first case also highlighted the importance of knowing who the contractor is – is it really the contractor undertaking the works or some other entity/group company? In the second case, the court found that Cuddy was in breach of contract for not providing a performance bond and two collateral warranties, and it required Cuddy to use 'best endeavours' to obtain these documents, even though the contract between Cuddy and Liberty Mercian had terminated. The approach taken by Mr Justice Ramsey was not to ratchet up and force Cuddy to provide these documents, but instead he approached the matter in stages, which provided Cuddy an opportunity to take action and remedy the situation. In the third case, Cuddy and Liberty Mercian provided evidence in relation to Cuddy's efforts to procure a performance bond. The obligation on Cuddy to procure the bond was one of 'best endeavours'. How did Cuddy discharge this? Cuddy consulted underwriters and banks who suggested that a performance bond could not be secured as the works were now nearing practical completion, the NEC3 form of contract would need to be amended to make it acceptable to the underwriters, and that the contentious relationship between Liberty Mercian and Cuddy...