INTERNATIONAL CHAMBER OF COMMERCE
ICC UNIFORM RULES FOR CONTRACT BONDS
(ICC publication No. 524)
Introduction
These Uniform Rules have been drawn up by an ICC Working Party
of members representing the Commission on Insurance and the
building and engineering industry for worldwide application in
relation to Contract Bonds, being those bonds creating obligations
of an accessory nature, where the liability of the Surety or
Guarantor arises and is conditional upon an established default on
the part of a Contractor (defined in these Rules as the Principal)
under the Contract which is the subject matter of the relevant
Bond. The Rules set out below will therefore apply where the
intention of the parties is that the obligations of the Guarantor
will depend upon the duties or liabilities of the Principal under
the relevant Contract.
Bonds governed by the ICC Rules set out below are intended to
operate so as to confer upon the Beneficiary in each instance
security for the performance or execution of contract obligations
or payment of any sums which may fall due to the Beneficiary as a
result of any breach of obligation or default by the Principal
under the Contract. The Bond is intended to ensure that, subject
to its financial limits, either the obligations set out in the
Contract will be performed or executed, or that upon default, the
Beneficiary will recover any sum properly due notwithstanding the
insolvency of the Principal or the Principal's failure for any
other reason to satisfy or discharge its liability. Accordingly,
where a Bond governed by these Rules is in force, the Beneficiary
will have the additional assurance of the Guarantor's accessory
obligations to ensure that the judgment or award of any competent
court or arbitral tribunal is satisfied.
The relationship of the parties under a Bond governed by these
Rules number 524 differs from that arising under the ICC Uniform
Rules for Demand Guarantees number 458 (the Demand Rules). Where
the intention is that the Beneficiary is to obtain security for
the obligations of the Principal arising pursuant to the Contract
but that the Guarantor's liability shall only arise in case of an
established default under that Contract, these Rules should be
selected.
General
These Rules are intended to provide a clear and concise scheme
to regulate the nature of obligations arising under Bonds and
claims procedure. Because the nature of a Bond regulated by these
Rules is that the obligations of the parties are related directly
to and depend upon the obligations of the parties arising under
the Contract, the Rules do not contain detailed provisions dealing
with documentary requirements or the problem of unfair calling. In
the event of a dispute arising as to the liability of a Guarantor,
the Rules contemplate that such dispute will be determined by
reference to the Contract. The Guarantor and the Principal are
protected in that liability will arise only where default is
established. The Beneficiary is protected by the assurance that
any judgment or award will be discharged by the Guarantor if the
Principal fails to do so.
The Uniform Rules for Contract Bonds number 524 set out below
shall apply where expressly incorporated by the parties in
accordance with their detailed provisions. These new Rules depend
for their success upon their use by the international business
community. The ICC recommends the use of these new Rules which
will help to secure uniformity of practice in the operation and
enforcement of Bonds.
Article 1
Scope and application
a) These Rules shall be known as the "Uniform Rules for
Contract Bonds" and shall apply to any Bond which states that
these Rules shall apply, or otherwise incorporates these Rules by
reference and, for such purposes, it shall suffice that the Bond
incorporates a reference to these Rules and the publication
number.
b) If there shall be any conflict in the construction or
operation of the obligations of any parties under a Bond between
the provisions of these Rules and such Bond, or mandatory
provisions of the Applicable Law regulating the same, the
provisions of the Bond or, as the case may be, the mandatory
provisions of the Applicable Law shall prevail.
Article 2
Definitions
In these Rules, words or expressions shall bear the meanings
set out below and be construed accordingly
Advance Payment Bond
A Bond given by the Guarantor in favour of the Beneficiary to
secure the repayment of any sum or sums advanced by the
Beneficiary to the Principal under or for the purposes of the
Contract, where such sum or sums is or are advanced before the
carrying out of works, the performance of services or the supply
or provision of any goods pursuant to such Contract.
Beneficiary
The party in whose favour a Bond is issued or provided.
Bond
Any bond, guarantee or other instrument in writing issued or
executed by the Guarantor in favour of the Beneficiary pursuant to
which the Guarantor undertakes on Default, either:
i) to pay or satisfy any claim or entitlement to payment of
damages, compensation or other financial relief up to the Bond
Amount; or
ii) to pay or satisfy such claim or entitlement up to the Bond
Amount or at the Guarantor's option to perform or execute the
Contract or any Contractual Obligation.
In either case where the liability of the Guarantor shall be
accessory to the liability of the Principal under the Contract or
such Contractual Obligation and such expression shall without
limitation include Advance Payment Bonds, Maintenance Bonds,
Performance Bonds, Retention Bonds and Tender Bonds.
Bond Amount
The sum inserted in the Bond as the maximum aggregate
liability of the Guarantor as amended, varied or reduced from time
to time or, following the payment of any amount in satisfaction or
partial satisfaction of a claim under any Bond, such lesser sum as
shall be calculated by deducting from the sum inserted in the Bond
the amount of any such payment.
Contract
Any written agreement between the Principal and the
Beneficiary for the carrying out of works, the performance of
services or the supply or provision of any goods.
Contractual Obligation
Any duty, obligation or requirement imposed by a clause,
paragraph, section, term, condition, provision or stipulation
contained in or forming part of a Contract or tender.
Default
Any breach, default or failure to perform any Contractual
Obligation which shall give rise to a claim for performance,
damages, compensation or other financial remedy by the Beneficiary
and which is established pursuant to paragraph j of Article 7.
Expiry Date
Either (a) the date fixed or the date of the event on which
the obligations of the Guarantor under the Bond are expressed to
expire or (b) if no such date is stipulated, the date determined
in accordance with Article 4.
Guarantor
Any Person who shall issue or execute a Bond on behalf of a
Principal.
Maintenance Bond
A Bond to secure Contractual Obligations relating to the
maintenance of works or goods following the physical completion or
the provision thereof, pursuant to a Contract.
Performance Bond
A Bond to secure the performance of any Contract or
Contractual Obligation.
Person
Any company, corporation, firm, association, body, individual
or any legal entity whatsoever.
Principal
Any Person who (i) either (a) submits a tender for the purpose
of entering into a Contract with the Beneficiary or (b) enters
into a Contract with the Beneficiary and (ii) assumes primary
liability for all Contractual Obligations thereunder.
Retention Bond
A Bond to secure the payment of any sum or sums paid or
released to the Principal by the Beneficiary before the date for
payment or release thereof contained in the Contract.
Tender Bond
A Bond in respect of a tender to secure the payment of any
loss or damage suffered or incurred by the Beneficiary arising out
of the failure by the Principal to enter into a Contract or
provide a Performance Bond or other Bond pursuant to such tender.
Writing and Written
Shall include any authenticated tele-transmissions or tested
electronic data interchange ("EDI") message equivalent thereto.
Article 3
Form of bond and liability of the guarantor
to the beneficiary
a) The Bond should stipulate:
i) The Principal.
ii) The Beneficiary.
iii) The Guarantor.
iv) The Contract.
v) Where the Bond does not extend to the whole of the
Contract, the precise Contractual Obligation or Obligations to
which the Bond relates.
vi) The Bond Amount.
vii) Any provisions for the reduction of the Bond Amount.
viii) The date when the Bond becomes effective (defined in
these rules as the "Effective Date").
ix) Whether the Guarantor shall be entitled at its option
to perform or execute the Contract or any Contractual
Obligation.
x) The Expiry Date.
xi) The names, addresses, telex and/or telefax numbers and
contact references of the Beneficiary, the Guarantor and the
Principal.
xii) Whether sub-paragraph i of Article 7j is to apply and
the name of the third party to be nominated thereunder for the
purpose of Article 7 below (claims procedure).
xiii) How disputes or differences between the Beneficiary,
the Principal and the Guarantor in relation to the Bond are to
be settled.
b) The liability of the Guarantor to the Beneficiary under the
Bond is accessory to the liability of the Principal to the
Beneficiary under the Contract and shall arise upon Default. The
Contract is deemed to be incorporated into and form part of the
Bond. The liability of the Guarantor shall not exceed the Bond
Amount.
c) Save for any reduction of the Bond Amount under the terms
of the Bond or the Contract and subject to Article 4, the
liability of the Guarantor shall not be reduced or discharged by
reason of any partial performance of the Contract or any
Contractual Obligation.
d) All defences, remedies, cross claims, counter-claims and
other rights or entitlements to relief which the Principal may
have against the Beneficiary under the Contract, or which may
otherwise be available to the Principal in respect of the subject
matter thereof, shall be available to the Guarantor in respect of
any Default in addition to and without limiting any defence under
or arising out of the Bond.
Article 4
Release and discharge of guarantor
a) Subject to any contrary provision in the Bond and the
provisions of paragraph b of this Article 4, the Expiry Date
shall be six months from the latest date for the performance of
the Contract or the relevant Contractual Obligations thereunder,
as the case may be.
b) Subject to any contrary provision of the Bond, the Expiry
Date for the purposes of an Advance Payment Bond, a Maintenance
Bond, a Retention Bond and a Tender Bond shall be as follows:
i) In the case of an Advance Payment Bond, the date on
which the Principal shall have carried out works, supplied
goods or services or otherwise performed Contractual
Obligations having a value as certified or otherwise
determined pursuant to the Contract equal to or exceeding the
Bond Amount.
ii) In the case of a Maintenance Bond, six months after
either the date stipulated by the Contract or, if no date has
been specified for the termination of the Principal's
maintenance obligations, the last day of the applicable
warranty period or defects liability period under the
Contract.
iii) In the case of a Retention Bond, six months after the
date stipulated by the Contract for the payment, repayment or
release of any retention monies.
iv) In the case of a Tender Bond, six months after the
latest date set out in the tender documents or conditions for
the submission of tenders.
c) Where the Expiry Date falls on a day which is not a
Business Day, the Expiry Date shall be the first following
Business Day. For the purpose of these Rules "Business Day" shall
mean any day on which the offices of the Guarantor shall
ordinarily be open for business.
d) A Bond shall terminate and, without prejudice to any term,
provision, agreement or stipulation of the Bond, any other
agreement or the Applicable Law providing for earlier release or
discharge, the liability of the Guarantor shall be discharged
absolutely and the Guarantor shall be released upon the Expiry
Date whether or not the Bond shall be returned to the Guarantor,
save in respect of any claim served in accordance with Article 7.
e) Notwithstanding the provisions of paragraph d of this
Article 4, the Bond may be cancelled at any time by the return of
the Bond itself to the Guarantor or by the service upon and
delivery or transmission to the Guarantor of a release in writing
duly signed by an authorised representative of the Beneficiary,
whether or not accompanied by the Bond and/or any amendment or
amendments thereto.
f) The Guarantor shall promptly inform the Principal of any
payment made under or pursuant to the Bond and of the
cancellation, release or discharge thereof or any reduction in the
Bond Amount where the same shall not already have been
communicated.
Article 5
Return of the Bond
The Bond shall immediately after release or discharge under
these Rules be returned to the Guarantor, and the retention or
possession of the Bond following such release or discharge shall
not of itself operate to confer any right or entitlement
thereunder upon the Beneficiary.
Article 6
Amendments and variations to and of the contract
and the bond and extensions of time
a) The Bond shall, subject to the Bond Amount and the Expiry
Date, apply to the Contract as amended or varied by the Principal
and the Beneficiary from time to time.
b) A Tender Bond shall be valid only in respect of the works
and contract particulars set out or described in the tender
documents at the Effective Date, and shall not apply beyond the
Expiry Date or in any case where there shall be any substantial or
material variation of or amendment to the original tender after
the Effective Date, unless the Guarantor shall confirm, in the
same manner as set out in paragraph c of this Article 6, that
the Tender Bond so applies or the Expiry Date has been extended.
c) Any amendment to a Bond, including without limitation the
increase of the Bond Amount or the alteration of the Expiry Date,
shall be in writing duly signed or executed by authorised
representatives of each of the Beneficiary, the Principal and the
Guarantor.
Article 7
Submission of claims and claims procedure
a) A claim under a Bond shall be in writing and shall be
served upon the Guarantor on or before the Expiry Date and by no
later than the close of the Business Day at the Guarantor's
principal place of business set out in the Bond, on the Expiry
Date.
b) A claim submitted by authenticated tele-transmission, EDI,
telex or other means of telefax facsimile or electronic
transmission shall be deemed to be received on the arrival of such
transmission.
c) A claim delivered to the Guarantor's principal place of
business set out in the Bond shall, subject to proof of delivery,
be deemed to be served on the date of such delivery.
d) A claim served or transmitted by post shall, subject to
satisfactory proof of delivery by the Beneficiary, be deemed to be
served upon actual receipt thereof by the Guarantor.
e) The Beneficiary shall, when giving notice of any claim by
telefax or other tele-transmission or EDI, also send a copy of
such claim by post.
f) Any claim shall state brief details of the Contract to
identify the same, state that there has been a breach or default
and set out the circumstances of such breach or default and any
request for payment, performance or execution.
g) Upon receipt of a claim from the Beneficiary, the Guarantor
shall send notice in writing to the Principal of such claim as
soon as reasonably practicable and before either (a) making any
payment in satisfaction or partial satisfaction of the same or (b)
performing the Contract or any part thereof pursuant to a
Contractual Obligation.
h) The Beneficiary shall, upon written request by the
Guarantor, supply to the Guarantor such further information as the
Guarantor may reasonably request to enable it to consider the
claim, and shall provide copies of any correspondence or other
documents relating to the Contract or the performance of any
Contractual Obligations and allow the Guarantor, its employees,
agents or representatives to inspect any works, goods or services
carried out or supplied by the Principal.
i) A claim shall not be honoured unless
i) A Default has occurred; and
ii) The claim has been made and served in accordance with
the provisions of paragraphs a - f of Article 7 on or before
the Expiry Date.
j) Notwithstanding any dispute or difference between the
Principal and the Beneficiary in relation to the performance of
the Contract or any Contractual Obligation, a Default shall be
deemed to be established for the purposes of these Rules:
i) upon issue of a certificate of Default by a third party
(who may without limitation be an independent architect or
engineer or a Pre-Arbitral referee of the ICC) if the Bond so
provides and the service of such certificate or a certified
copy thereof upon the Guarantor, or
ii) if the Bond does not provide for the issue of a
certificate by a third party, upon the issue of a certificate
of Default by the Guarantor, or
iii) by the final judgment, order or award of a court or
tribunal of competent jurisdiction, and the issue of a
certificate of Default under paragraph (i) or (ii) shall not
restrict the rights of the parties to seek or require the
determination of any dispute or difference arising under the
Contract or the Bond or the review of any certificate of
Default or payment made pursuant thereto by a court or
tribunal of competent jurisdiction.
k) A copy of any certificate of Default issued under j(i) or
(ii) shall be given by the Guarantor to the Principal and the
Beneficiary forthwith.
l) The Guarantor shall consider any claim expeditiously and,
if such claim is rejected, shall immediately give notice thereof
to the Beneficiary by authenticated tele-transmission or other
telefax, facsimile transmission, telex, cable or EDI, confirming
the same by letter, setting out the grounds for such refusal
including any defences or other matters raised under paragraph d
of Article 3.
Article 8
Jurisdiction and settlement of disputes
a) The Applicable Law shall be the law of the country selected
by the parties to govern the operation of the Bond and, in the
absence of any express choice of law, shall be the law governing
the Contract and any dispute or difference arising under these
Rules in relation to a Bond shall be determined in accordance with
the Applicable Law.
b) All disputes arising between the Beneficiary, the Principal
and the Guarantor or any of them in relation to a Bond governed by
these Rules shall, unless otherwise agreed, be finally settled
under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators
appointed in accordance with the said Rules.
c) If the Bond shall exclude the operation of the arbitration
provisions of this Article 8, any dispute between the parties to
the Bond shall be determined by the courts of the country
nominated in the Bond, or, if there is no such nomination, the
competent court of the Guarantor's principal place of business or,
at the option of the Beneficiary, the competent court of the
country in which the branch of the Guarantor which issued the Bond
is situated.
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