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Construction Law/Performance Bank Guarantee


Dear Sir!

We are working as a Contractor at a project under FIDIC EPC 1999 in PK. The Employer failed to pay us due payments on time. Our original Contract Period finished. The Employer took almost a year to settle EOT case and at last issued official notice of EOT. It was the time when our original DLP was ending and Performance Bank Guarantee was going to be expired. We were asked by the Employer to provide valid performance bank guarantee up-to revised DL date. But our previous bank refused to give extension of Performance Bank Guarantee due to some internal issues. So, we went to another bank. It took almost 3 months to deal with new bank and at last performance bank guarantee was issued. Now I come to my problem which is that there is a gap of 3 months between end of previous bank guarantee and issuance date of new bank guarantee.  The Employer has refused to accept revised bank guarantee on the plea of none covering of 3 months. We again tried to convince the new bank to issue guarantee covering the gap period but they said that they cannot issue a guarantee having issuance date of 3 months back date. The Employer is not releasing our payments on the plea of valid performance bank guarantee (which is actually valid up-to rev DLP but not covered the 3 months already passed). Kindly comment on the situation and suggest a remedy. We are stuck up.

Dear Ishaq Sb,

Your question is quite a tricky one and is more legal as compared with contractual.

I would like to suggest directly to the possible solution rather to comment the  developed scenario.
The new bank should write the client that the provided performance guarantee will be considered  effective from the date three month back but for that purpose, you need to convince the bank that it will not put any bar on the bank and the Client can,t raise any issue for the past three months.Convince the Bank that it is just a formality.Hope the issue will be resolved and you may be able to receive balance due payments.

To the maximum,you may bear the  service charges of the Bank for the three month and bank after receiving services charges, may issue the guarantee  on the current date  for the requisite period.In case of any further issue ,you may consult me any time.

Engr. Arshad Mahmood  

Construction Law

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Arshad Mahmood


I may answer to the questions relating to FIDIC 4th as well as FIDIC 2010 MDB Harmonized version,price adjustment ,Variations,Eot and Cost claims,EPC Contract,Bidding Document,consultancy Contracts,certification,Standard Forms, Dispute resolution; and others pertaining to Contract implementation.


Contract management and Contract Administration, using FIDIC Conditions of 4th Addition as well as Fidic 1999 Red, Yellow and Silver Books including MDB Harmonized Edition 2010. Particularly in the area of Procurement of Contracts, Certification,Price Adjustment, variations,disputes management, EoT and Cost Claims; and other contractual issues arises from time to time during currecy of the Contracts.

Member -Pakistan Engineering Council Member -Pakistan Engineering Congress Member -FIDIC Organisation

Joint Venture and Consortium Agreements for Pakistan Engineering Council,Pakistan

BSc Civil Engineering; Basic Management course; Hydro power Projects; and various other on Job Trainings

Awards and Honors
Commendation Certificate for the excellent management qualities and dedication at Ghazi Barotha Hydropower Project; and Certificate of Excellent work performed during Survey Camp.

Past/Present Clients
Water and Power Development Authority (WAPDA),Associate Consulting Engineer(ACE) and National Engineering services Pakistan(Pvt.) Limited (NESPAK)

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