Demand guarantees in the construction industry: A comparative legal study of their use and abuse from a South African, English and German perspective

Despite the seemingly numerous situations in which grossly unfair calls on demand guarantees may typically occur, the utilisation and inclusion of guarantees into construction contracts is still advantageous and recommended. As pointed out above, only demand guarantees offer assured and swift access to cash when construction defects emerge, payment is outstanding, or a construction party becomes insolvent or is liquidated. At the same time, demand guarantees are relatively simple instruments, versatile and internationally-accepted, and do not necessarily require the applicant to deposit cash or otherwise tie up capital whilst in operation. Therefore, demand guarantees are an indispensable feature in construction contracts of certain complexity and value.