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Construction Law/The Employer claim the full amount of the Peformance Security

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Question
Dear Jonathan,

Contractor submitted the Performance Security (PS)under the FIDIC 1999 1st edition, the expiry date was 15 September 2013. The Completion Date in Taking over certificate was 01 Jan 2014. This performance security was requested to extend by the Employer, the revised expiry date will be 31 Jan 2014 according to EOT.  But the Contractor can not extend it because they got into difficulty with the finance. In case may the Employer claim the full amount of the PS and deduct from Contractor's workdone valuation which is hold by the Employer?

Thanks and Regards,
Le Quang Huy

Answer
Dear Huy,

Xin Chao!

First, please take note that the Performance Security should be valid and enforceable until all Works are executed, completed and defects are remedied by the Contractor.  

There are events where the Employer may claim under the Performance Security one of which is when the Contractor fails to extend the validity of the Performance Security as stipulated under sub-clause 4.2 par.1-3.

In this event, pursuant to sub-clause 4.2 par.4 item (a) , the Employer may claim the full amount of the Performance Security.


I hope the above helps. Cam on.

Regards,

Jonathan L. Peralta

Construction Law

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Jonathan L. Peralta

Expertise

Questions relating to construction claims, Extension of Time, Variations, Interim Payment and delay analysis under FIDIC Form of Contracts.

Experience

Experience in the following sectors: buildings, residential, infrastructure, civil and marine works. Have worked for different international contractors in Myanmar, Vietnam and the Philippines.

Organizations
AACEI, U.S.A., Dispute Resolution Board Foundation,U.S.A., ASCE, U.S.A., PICE,Philippines

Education/Credentials
Bachelor of Science in Civil Engineering, Registered Civil Engineer in the Philippines

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