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Question
Can Performance bond period can be limited till Final completion date? Or is it that we should keep it till completion of Defect liability Certificate is issued?
In case there is retention amount involved , is it ok to have the Perf bond for the period till Final completion certificate issued?
IS it possible to have Perf Guarantee for period till issue of Defects Liability certificate  & also have retention money clause in the agreement?
Kindly advice.
regds
Krishnan

Answer
Dear Krishnan,

Thank you for this question.

I am a little confused by what seems to be a differentiation in your question between the end of the Defects Notification Period and the Final Completion. Usually the Final Completion Certificate is not issued until after the Defects Notification period ends.

Regarding a Performance Bond, however, it is possible for the Parties to agree the period of the Performance Bond and for that Bond to expire at an earlier date of, for example, Taking-Over of the Works.

Retention is entirely separate from the matter of a Performance Bond. Indeed it is common to have a Performance Bond and for retention to be withheld during the currency of the project. It is also common for there to be a waiver of the withholding of retention and for the contractor to provide a Retention Bond in substitution.

In summary, it is common practice for a Performance Bond of some description to be in place until all the Contractor's obligation have been completed and for the Bond to be released after Final Completion. It is also accepted widely that retention )or a retention bond) will be held in full prior to taking-over and then at a reduced level until the Defects Notification period ends, after which the retention is released.



I hope that this assists you.

Kind regards,
John Dowse

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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