Performance Guarantees and On-Demand Guarantees

Performance Guarantees and On-Demand Guarantees in South African Construction Law

Performance Guarantees and On-Demand Guarantees are security instruments commonly used in construction and commercial contracts to protect an employer or other beneficiary against specified risks associated with a contractor’s failure to perform its obligations.

Although the expressions “performance guarantee”, “construction guarantee”, “performance bond” and “on-demand guarantee” are sometimes used interchangeably in the construction industry, their legal effect depends on the actual wording of the instrument rather than its title.

This distinction is fundamental under South African law.

An on-demand guarantee generally creates an autonomous obligation on the part of the guarantor to pay the beneficiary when the documentary and other conditions stipulated in the guarantee have been satisfied. The beneficiary ordinarily does not first have to prove the contractor’s underlying contractual liability.

A conditional guarantee, by contrast, may operate more like an accessory obligation or suretyship. Depending upon its wording, the beneficiary may be required to establish that the contractor is actually liable under the underlying construction contract before payment becomes due.

The Supreme Court of Appeal has repeatedly emphasised this distinction. In Minister of Transport and Public Works, Western Cape v Zanbuild Construction (Pty) Ltd, the Court explained that a conditional bond may require the claimant to establish the contractor’s liability, whereas an on-demand bond generally requires a demand based upon the event identified in the guarantee.

South African jurisprudence concerning demand guarantees has developed significantly through decisions including Lombard Insurance Company Ltd v Landmark Holdings (Pty) Ltd, Dormell Properties 282 CC v Renasa Insurance Company Ltd, Guardrisk Insurance Company Ltd v Kentz (Pty) Ltd, Eskom Holdings SOC Ltd v Hitachi Power Africa (Pty) Ltd, Coface South Africa Insurance Co Ltd v East London Own Haven, Joint Venture between Aveng (Africa) (Pty) Ltd and Strabag International GmbH v SANRAL, and, more recently, Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd.

The current position strongly protects the commercial autonomy of a genuine on-demand guarantee. A dispute under the underlying construction contract will not ordinarily permit the contractor or guarantor to prevent payment once a complying demand has been made. The principal recognised exception is fraud attributable to the beneficiary, together with the logically separate question whether the beneficiary has complied with the requirements of the guarantee itself. The SCA’s 2025 decision in Set Square reaffirmed this approach and rejected an attempt to establish unconscionability as a separate defence to payment under an on-demand guarantee.

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Why Performance Guarantees and On-Demand Guarantees Matter

Construction projects involve substantial financial risk.

An employer may make payments to a contractor months or years before the project is finally complete. If the contractor becomes insolvent, abandons the works or materially defaults, the employer may have to appoint another contractor at significantly increased cost.

A performance guarantee provides security against defined risks of that nature.

The contractor typically arranges for a bank, insurer or specialist guarantor to issue the guarantee in favour of the employer. The guarantee normally states a maximum guaranteed amount, commonly expressed as a percentage of the contract value.

The guarantee may then reduce over time or terminate on specified events, depending upon its wording.

For the employer, the commercial value of an on-demand guarantee is liquidity. Instead of first litigating the underlying construction dispute for several years and only afterwards attempting to recover from the contractor, the employer may be entitled to call upon the guarantee when the specified trigger event occurs.

For the contractor, however, the guarantee represents substantial contingent exposure.

The guarantor normally obtains indemnities or counter-security from the contractor or related entities. Accordingly, payment by the guarantor may ultimately produce a corresponding claim against the contractor.

This explains why guarantee calls frequently produce urgent court applications.

A contractor may argue that the employer is not entitled to the money, that termination was unlawful, that the employer itself breached the construction contract, or that the call exceeds the employer’s actual damages.

Those arguments may be highly relevant to the underlying construction dispute.

They are not necessarily relevant to the guarantor’s independent payment obligation.

That separation is one of the most important features of Performance Guarantees and On-Demand Guarantees.

Distinguishing Performance Guarantees and On-Demand Guarantees from Conditional Guarantees

The first task in any guarantee dispute is classification.

The title appearing at the top of the document is not decisive.

A document labelled “Performance Guarantee” may in substance create an autonomous demand obligation. Another document bearing a similar title may create a conditional obligation linked directly to the contractor’s liability.

The instrument must therefore be interpreted as a whole.

In Zanbuild, the Supreme Court of Appeal distinguished a conditional guarantee from an on-demand bond. The Court explained that, under a conditional bond, a claimant may have to allege and sometimes establish liability on the part of the contractor. Under an on-demand bond, liability generally depends upon the beneficiary making the contractually specified demand based upon the event identified in the instrument.

The wording used in modern construction guarantees often makes the intended independence explicit.

For example, an autonomous guarantee may provide that any reference to the underlying construction contract is included merely for convenience and is not intended to create an accessory obligation or suretyship. South African courts have repeatedly treated wording of that nature as highly significant.

By contrast, a guarantee that makes payment dependent upon an amount actually being “owing and due” by the contractor may require deeper examination of the underlying contract.

The issue is therefore not whether the guarantee mentions the construction contract. Almost every construction guarantee necessarily identifies the underlying project.

The question is what legal significance the guarantee gives that relationship.

If the guarantee says that the guarantor’s liability is independent and payment follows upon presentation of specified documents, that strongly indicates an autonomous guarantee.

If the instrument requires proof of the contractor’s indebtedness, liability or breach as a substantive precondition to payment, it may be conditional.

This distinction affects almost every later issue.

It determines whether underlying contractual defences are relevant, what evidence the beneficiary must produce, whether an arbitrator’s later decision changes the guarantor’s immediate obligation, and how difficult it will be for the contractor to obtain an interdict.

Construction parties should therefore analyse the proposed guarantee wording before the contract is signed rather than discovering its effect only after termination.

The Autonomy Principle in Performance Guarantees and On-Demand Guarantees

The autonomy principle means that a genuine demand guarantee creates a contractual obligation between the guarantor and beneficiary that is legally separate from the underlying agreement between employer and contractor.

This principle has become firmly established in South African law.

In Lombard Insurance Company Ltd v Landmark Holdings (Pty) Ltd, the Supreme Court of Appeal compared the guarantee before it with an irrevocable letter of credit and emphasised the independent payment obligation undertaken by the guarantor when the specified requirements are satisfied.

The same approach was developed in later cases.

In Guardrisk Insurance Company Ltd v Kentz (Pty) Ltd, the SCA again dealt with the independent nature of construction guarantees and explained that the guarantor’s obligation arose on occurrence of the event specified by the guarantee.

In Eskom Holdings SOC Ltd v Hitachi Power Africa (Pty) Ltd, the SCA rejected an interpretation that would have imported an additional notice requirement from the underlying construction contract where the demand guarantee itself did not impose that requirement.

The principle was further reinforced in Coface South Africa Insurance Co Ltd v East London Own Haven. That judgment became particularly important because it endorsed the autonomous character of the guarantee and limited reliance upon underlying contractual disputes as a defence to a complying guarantee call.

In Joint Venture between Aveng and Strabag v SANRAL, the SCA again rejected an attempt to restrict the beneficiary’s rights under the performance guarantee by relying upon provisions of the underlying construction contract that were not incorporated into the guarantee in the manner alleged.

The principle has now received fresh confirmation in Set Square Developments v Power Guarantees, decided by the SCA on 20 May 2025. The case concerned three on-demand guarantees issued as security for a contractor’s obligations on a housing development. The SCA reaffirmed the autonomy of those guarantees and addressed attempted defences based on underlying-contract questions, fraud and unconscionability.

The commercial rationale is straightforward.

If every call on an on-demand guarantee could be suspended until the merits of the construction dispute had been finally determined, the guarantee would lose much of the liquidity and security for which the beneficiary bargained.

The guarantee is designed precisely to separate immediate security from the ultimate accounting between employer and contractor.

That does not mean the employer necessarily gets to keep the money permanently.

The underlying dispute may subsequently establish that the employer was contractually wrong and must restore money or pay damages.

But that later accounting is conceptually separate from the guarantor’s immediate obligation under an autonomous instrument.

Calling Performance Guarantees and On-Demand Guarantees

Autonomy does not mean that a beneficiary can ignore the wording of the guarantee.

A demand guarantee is independent, but it is still a contract.

The beneficiary becomes entitled to payment only by satisfying the trigger requirements agreed with the guarantor.

Those requirements vary substantially.

A guarantee may require a written demand delivered to a specified physical address.

It may require the demand to state that the construction contract has been terminated because of contractor default.

It may require a copy of the termination notice.

Another guarantee may require production of a payment certificate.

A different guarantee may require a written statement that the contractor has failed to perform identified obligations.

Some guarantees use a two-stage demand procedure.

The beneficiary may first have to demand payment from the contractor and allow a specified period to expire before calling upon the guarantor.

These requirements must be read carefully.

In the SCA’s 2022 decision concerning Millenium Aluminium and Glass Services CC, the guarantee before the Court required specified written demands and a payment advice before the guarantor’s payment obligation arose. The Court treated the guarantee as an independent undertaking and applied its express documentary requirements.

The practical lesson is that a beneficiary should prepare the demand directly against the guarantee wording.

The demand should not simply be copied from an earlier project.

Names, contract references, addresses, dates, certified amounts and required statements should be verified.

If the guarantee requires a particular notice to accompany the demand, that document should actually be enclosed.

If delivery is required at a particular domicilium, the beneficiary should obtain reliable proof of delivery.

The guarantee’s expiry date also requires careful attention.

A demand made after expiry may be worthless even if the contractor’s breach occurred earlier.

Employers should therefore maintain a security register recording the guarantor, guarantee number, guaranteed amount, reduction dates, expiry date, original document requirements and circumstances giving rise to a valid call.

Contractors should maintain the same information because inadvertent expiry of required security may itself constitute contractual default.

Fraud and Performance Guarantees and On-Demand Guarantees

The fraud exception is narrow but important.

South African courts recognise that the autonomy principle should not be used as an instrument of fraud.

Where the beneficiary fraudulently makes a demand under a guarantee and the required legal standard is established, the guarantor may resist payment or a court may intervene.

However, fraud is not established merely because the contractor disputes the beneficiary’s contractual position.

A genuine disagreement about whether the contractor defaulted does not automatically amount to fraud.

Nor is an employer necessarily fraudulent merely because an arbitrator or court may ultimately decide that the employer was wrong.

The fraud enquiry ordinarily requires dishonesty.

In Guardrisk v Kentz, the SCA dealt specifically with the fraud exception in the context of construction guarantees. The Court’s treatment confirms that fraud must be established as a genuine exception to the otherwise autonomous payment obligation rather than simply inferred from an underlying contractual dispute.

The 2025 Set Square judgment reinforces the narrowness of the available defences.

Power Guarantees sought to resist payment on grounds including fraud and unconscionability. The SCA dealt with the on-demand instruments as autonomous guarantees and rejected the asserted defences on the facts. Significantly, the judgment did not accept unconscionability as an independent general exception permitting a guarantor to avoid an otherwise valid on-demand obligation.

A contractor seeking urgently to restrain a call must therefore do more than produce evidence that the employer’s construction claim is weak.

For example, suppose the employer states in the guarantee demand that it terminated the construction contract on a particular date.

If termination genuinely occurred, a dispute about whether that termination was contractually justified will not necessarily establish fraud.

The position could be very different if the employer knowingly states that termination occurred when it knows that no termination notice was ever issued.

The relevant dishonesty must be established through evidence.

Bare accusations of bad faith are unlikely to overcome the strong commercial policy supporting autonomous guarantees.

Underlying Contract Disputes and the Guarantee

The most difficult conceptual issue for many construction parties is accepting that an employer may potentially make a valid guarantee call while being wrong on the ultimate merits of the underlying dispute.

That outcome is inherent in an autonomous security instrument.

Suppose the employer terminates a contractor for alleged failure to progress the works and calls an on-demand guarantee.

The contractor contends that its poor progress resulted from late employer drawings and that the employer therefore had no right to terminate.

Those allegations may become central to arbitration regarding wrongful termination.

They do not necessarily defeat the guarantee call.

In Aveng/Strabag v SANRAL, the SCA reinforced the principle that the autonomous performance guarantee must be interpreted according to its own wording and should not be restricted by underlying contractual provisions unless the guarantee itself properly makes those provisions relevant.

The 2025 Set Square decision is even more recent confirmation that disputes surrounding the underlying construction arrangements do not ordinarily undo the autonomous character of an on-demand guarantee.

This approach creates a “pay now, argue later” commercial effect.

The beneficiary receives security if the guarantee conditions are fulfilled.

The contractor retains the right to challenge the employer’s underlying contractual conduct through the agreed dispute-resolution process.

If the contractor ultimately succeeds, appropriate restitutionary, contractual or damages consequences may follow depending upon the dispute and pleaded relief.

Parties should therefore avoid combining two legally distinct questions.

The first question is: Was the guarantee validly called?

The second is: Was the employer ultimately entitled under the construction contract to the economic benefit represented by the call?

Those questions can produce different answers at different stages of the dispute.

Strict Compliance With Demand Requirements

Although underlying disputes may ordinarily be irrelevant, the requirements of the guarantee itself are not.

An on-demand guarantee is documentary in nature.

A beneficiary cannot demand payment simply because it believes the commercial purpose of the guarantee has been satisfied.

The beneficiary must comply with the requirements actually stipulated.

The extent of compliance required will depend on interpretation of the instrument.

South African decisions have repeatedly scrutinised whether notices, statements, cancellation documents and other specified material satisfied the guarantee.

The fundamental distinction is between evaluating the truth of the underlying construction dispute, which autonomy ordinarily excludes, and evaluating whether the demand itself satisfies the guarantee, which remains essential.

For example, a guarantee may state that payment follows upon receipt of a written demand stating that the contract “has been terminated due to the contractor’s default”, accompanied by a copy of the notice of termination.

The guarantor is entitled to establish whether those documents were delivered in the form required.

It is a different question whether the contractor was genuinely in default as a matter ultimately to be determined under the construction contract.

The SCA’s decision in Eskom v Hitachi is instructive because the Court declined to import an additional notice prerequisite from the underlying contract where the language of the guarantee did not require it.

The converse is equally important.

Where the guarantee itself requires a document, the beneficiary cannot ordinarily rely on the proposition that the requirement is commercially unnecessary.

Careful demand preparation is therefore critical.

In substantial projects, a guarantee call should preferably be legally reviewed before it is issued.

An avoidable documentary error may delay access to security at precisely the point when the employer is dealing with contractor default, replacement procurement and substantial financial exposure.

Urgent Interdicts to Stop a Guarantee Call

Construction guarantee disputes frequently arise through urgent interdict applications.

A contractor may discover that the employer intends to call the guarantee and approach the High Court seeking an order preventing the employer from making the demand or preventing the guarantor from paying.

The contractor faces a substantial legal hurdle where the instrument is genuinely autonomous.

An ordinary dispute regarding the underlying construction contract will generally be insufficient.

The contractor must establish recognised grounds justifying intervention, most importantly a properly supported fraud case or failure to satisfy the guarantee’s own requirements.

The Aveng/Strabag litigation arose from an attempt to restrain SANRAL from demanding payment under a performance guarantee. The SCA upheld the autonomous nature of the guarantee and rejected reliance upon the underlying contract as the proposed restriction on SANRAL’s demand.

Other South African High Court cases have similarly applied the principle that liability under an autonomous guarantee becomes absolute once its requirements are met, absent a recognised exception such as fraud.

Urgency alone does not reduce the substantive threshold.

The contractor should therefore obtain the actual guarantee immediately.

It should identify the proposed call clause and ask whether the beneficiary’s demand complies with each requirement.

If fraud is alleged, the evidence establishing dishonesty must be assembled with specificity.

Correspondence, certificates, termination notices, admissions, programme records and other contemporaneous documentation may be relevant.

An application based only on an allegation that “the employer caused the delay” is likely to focus on the underlying dispute rather than the guarantee.

From the employer’s perspective, preparation also matters.

A rushed call containing factual mistakes can generate avoidable litigation.

The demand should be precise, contractually compliant and limited to representations that the employer can honestly make.

Practical Risk Management for Employer, Contractor and Guarantor

Guarantee disputes can often be reduced through better drafting and administration.

The employer should determine at tender stage what type of security is actually required.

If immediate liquid security is commercially important, an autonomous on-demand guarantee may be appropriate.

If the intention is that payment should occur only once contractor liability has been established, a conditional form may better reflect the intended allocation of risk.

Ambiguous hybrid wording should be avoided.

The employer should also consider the guaranteed amount, reduction mechanism and expiry date.

A guarantee that expires too early may leave the employer unsecured during a material phase of the project.

A guarantee that continues unnecessarily may impose avoidable banking or insurance costs on the contractor.

The contractor should understand the indemnity arrangements behind the guarantee.

A guarantor that pays the employer will ordinarily look to its contractual indemnity arrangements with the contractor or other indemnifying parties.

The contractor should therefore treat a guarantee call as a material financial event rather than assuming that the insurer or bank permanently bears the loss.

Where the employer proposes bespoke guarantee wording, contractors should examine whether the guarantee is genuinely capped, what triggers payment, whether partial calls are permitted, how the guarantee reduces and when it expires.

Project teams should also avoid informal amendments.

If the construction completion date is extended but the guarantee expires on a fixed calendar date, an extension of the construction contract does not necessarily extend the guarantee automatically.

A replacement or amendment may be necessary.

Likewise, changes in the employer, contractor or project structure should be reviewed against the guarantee.

A guarantee is a separate contract and cannot necessarily be treated as though it automatically follows every amendment to the underlying construction arrangement.

The guarantor must also administer demands carefully.

Its role under an autonomous guarantee is not ordinarily to adjudicate the entire construction dispute.

It must, however, determine whether a demand satisfying its contractual undertaking has been received and whether any legally sustainable defence applies.

Conclusion: Performance Guarantees and On-Demand Guarantees

Performance Guarantees and On-Demand Guarantees are among the most powerful risk-allocation instruments used in South African construction contracting.

Their effectiveness depends on the separation between the guarantor’s undertaking and the underlying employer-contractor dispute.

South African appellate authority has repeatedly reinforced that autonomy.

Lombard v Landmark established influential principles concerning the independent character of demand guarantees. Guardrisk v Kentz, Eskom v Hitachi and Coface v East London Own Haven strengthened the jurisprudence. Aveng/Strabag v SANRAL confirmed that contractual restrictions from the underlying agreement cannot simply be imported into the guarantee.

The SCA’s 2025 decision in Set Square Developments v Power Guarantees provides particularly important recent confirmation. On-demand guarantees remain autonomous, underlying contractual disputes are generally not available as defences to payment, and unconscionability has not been recognised as a separate general exception to the obligation to honour a complying demand.

Fraud remains exceptional.

The beneficiary’s demand must nevertheless satisfy the guarantee itself.

This distinction is central.

Autonomy prevents the guarantor from turning the guarantee dispute into a trial of the construction contract.

It does not excuse the beneficiary from complying with the documentary and substantive trigger requirements contained in the guarantee.

Employers should therefore call guarantees with precision.

Contractors contemplating an urgent interdict should distinguish genuine guarantee defences from ordinary contractual disputes.

Guarantors should apply the wording of the independent undertaking rather than attempting to adjudicate the merits of the underlying project.

Most importantly, all three parties should understand the instrument before it is issued.

The legal consequences of a demand guarantee are often most severe at the very moment the construction relationship has broken down. Clear drafting and disciplined administration can substantially reduce the risk of urgent, expensive guarantee litigation.

What Are Performance Guarantees and On-Demand Guarantees?

Performance Guarantees and On-Demand Guarantees are security arrangements under which a guarantor undertakes to pay a beneficiary when the requirements contained in the guarantee are satisfied.

A true on-demand guarantee generally creates a payment obligation independent of the underlying construction contract.

The specific document must nevertheless be interpreted because not every instrument called a “performance guarantee” is autonomous.

What Is the Difference Between an On-Demand Guarantee and a Conditional Guarantee?

The distinction concerns what the beneficiary must establish before the guarantor becomes liable.

An on-demand guarantee generally requires a compliant demand based on the trigger described in the guarantee.

A conditional guarantee may require proof that the contractor is actually liable under the construction contract.

The SCA explained this distinction in Zanbuild.

Is a Performance Guarantee the Same as a Suretyship?

Not necessarily.

An autonomous performance guarantee creates an independent primary payment obligation rather than an accessory suretyship obligation.

Many standard construction guarantees expressly state that references to the underlying contract do not create a suretyship or accessory obligation.

A conditional guarantee may, however, operate more similarly to a suretyship depending upon its wording.

Can an Employer Call an On-Demand Guarantee If the Contractor Disputes the Termination?

Potentially, yes.

If the guarantee requires a demand stating that the contract was terminated for contractor default and the beneficiary satisfies the guarantee’s requirements, the existence of an underlying dispute regarding whether termination was ultimately justified does not necessarily prevent payment.

This follows from the autonomy principle recognised in decisions such as Coface, Aveng/Strabag and Set Square.

What Is the Fraud Exception to Performance Guarantees and On-Demand Guarantees?

The fraud exception permits intervention where the beneficiary’s demand is fraudulent in the legally relevant sense.

This generally requires dishonesty rather than merely an incorrect contractual position.

A contractor’s contention that the employer has misinterpreted the contract is therefore not automatically a fraud case.

Guardrisk v Kentz is an important South African authority addressing this exception.

Is Unconscionability a Defence to an On-Demand Guarantee in South Africa?

The SCA’s 2025 judgment in Set Square Developments v Power Guarantees rejected the unconscionability defence advanced in that matter and reaffirmed the narrow nature of the recognised exceptions to autonomous demand guarantees.

Parties should therefore not assume that a court will restrain payment merely because a call appears commercially harsh or because the underlying dispute is substantial.

Can a Contractor Obtain an Interdict Stopping a Guarantee Call?

It is possible, but difficult where the guarantee is genuinely autonomous.

The contractor must identify a recognised legal basis for intervention.

A properly established fraud case may qualify.

Failure by the beneficiary to comply with the requirements of the guarantee may also mean that the guarantor’s payment obligation has not arisen.

An ordinary dispute about responsibility for construction delay or termination will generally not be enough.

Does the Beneficiary Have to Prove Its Actual Loss Before Calling the Guarantee?

Not ordinarily under a genuine on-demand guarantee unless the instrument itself makes proof or certification of the loss a condition of payment.

The commercial purpose of an autonomous guarantee is generally to provide immediate security without first resolving the underlying damages dispute.

The guarantee wording remains decisive.

Must the Demand Strictly Follow the Guarantee?

The beneficiary should comply carefully with all contractual requirements.

If the guarantee requires specified statements, notices, certificates or supporting documents, they should be provided in the prescribed manner.

A beneficiary should not assume that an obvious documentary defect will be ignored merely because the employer believes the contractor has defaulted.

Can a Guarantor Investigate the Underlying Construction Dispute?

A guarantor under an autonomous guarantee does not ordinarily act as the tribunal deciding who is right under the construction contract.

Its primary task is to determine whether its own payment undertaking has been triggered.

The SCA’s jurisprudence consistently protects that separation.

What Happens If the Employer Wrongfully Calls a Guarantee?

The answer depends upon what is meant by “wrongfully”.

If the demand does not satisfy the guarantee, the guarantor may not be obliged to pay.

If the demand is fraudulent, recognised remedies may be available.

If the demand complies with an autonomous guarantee but the employer is later found to have been wrong on the underlying contract, the contractor may pursue the appropriate contractual or other remedy arising from that underlying dispute.

A valid guarantee call and ultimate entitlement to retain the economic benefit are not necessarily the same question.

What Happens When a Performance Guarantee Expires?

An autonomous guarantee ordinarily ceases to be callable once it has expired according to its terms.

Employers should therefore monitor expiry dates carefully.

If the underlying construction programme is extended, the guarantee may need to be formally extended or replaced.

Parties should not assume that amending the construction contract automatically extends a separately issued guarantee.

Does JBCC Use Performance Guarantees?

JBCC projects commonly use construction guarantees as security for performance and payment obligations.

The precise JBCC edition, guarantee form and amendments must be checked.

South African appellate jurisprudence concerning construction guarantees has repeatedly dealt with guarantee wording derived from standard construction-contract environments, including wording excluding an intention to create a suretyship or accessory obligation.

References

Legal authority	Substance	Importance
Lombard Insurance Company Ltd v Landmark Holding (Pty) Ltd and Others (343/08) [2009] ZASCA 71; 2010 (2) SA 86 (SCA)	The SCA considered an autonomous guarantee and compared its commercial operation to an irrevocable letter of credit. The guarantor’s obligation arose upon satisfaction of the conditions contained in the guarantee.	This is a foundational South African authority on the independent nature of demand guarantees. It establishes that the guarantor’s payment undertaking is not ordinarily dependent upon first resolving the underlying dispute between the contracting parties.
Dormell Properties 282 CC v Renasa Insurance Company Ltd and Another (491/09) [2010] ZASCA 137; 2011 (1) SA 70 (SCA)	The SCA considered a JBCC Series 2000 guarantee and competing views regarding the consequences of later determination of the underlying contractual dispute.	The case is important historically in the development of South African guarantee jurisprudence. Later SCA authority, particularly Coface, endorsed the minority approach to autonomy rather than treating a later underlying determination as a new general exception.
Minister of Transport and Public Works, Western Cape v Zanbuild Construction (Pty) Ltd (2011) 5 SA 528 (SCA)	The SCA distinguished conditional construction bonds from on-demand guarantees. A conditional bond may require the beneficiary to establish contractor liability, whereas an on-demand bond generally depends upon a demand based on the event stated in the guarantee.	Zanbuild is central to determining what kind of guarantee the parties actually created. The classification must be made from the language of the instrument rather than its heading.
Eskom Holdings SOC Ltd v Hitachi Power Africa (Pty) Ltd and Another (139/2013) [2013] ZASCA 101	The SCA interpreted a demand guarantee and rejected an attempt to import an additional notification requirement from the underlying construction contract where that condition did not appear in the guarantee itself.	The decision strongly illustrates autonomy: requirements contained in the underlying construction contract cannot simply be inserted into the guarantor’s independent undertaking.
Guardrisk Insurance Company Ltd and Others v Kentz (Pty) Ltd (94/2013) [2013] ZASCA 182; [2014] 1 All SA 307 (SCA)	The SCA considered autonomous construction guarantees and the fraud exception. The guarantor’s obligation depended upon occurrence of the specified trigger and compliance with the guarantee.	The judgment is a leading authority on both guarantee autonomy and the narrow fraud exception. It is especially relevant to urgent applications attempting to stop payment under a guarantee.
Coface South Africa Insurance Co Ltd v East London Own Haven t/a Own Haven Housing Association (050/2013) [2013] ZASCA 202; 2014 (2) SA 382 (SCA)	The SCA reinforced the autonomous nature of demand guarantees and clarified the relationship between the independent guarantee and disputes arising from the underlying construction agreement.	Coface is one of the most important modern South African guarantee decisions and is frequently cited for the proposition that underlying contractual disputes do not ordinarily provide a defence to a valid demand.
Joint Venture between Aveng (Africa) (Pty) Ltd and Strabag International GmbH v South African National Roads Agency SOC Ltd and Another (577/2019) [2020] ZASCA 146; 2021 (2) SA 137 (SCA)	A contractor sought to restrain SANRAL from calling a performance guarantee by relying upon restrictions said to arise from the underlying construction contract. The SCA reaffirmed the independent nature of the guarantee.	The case confirms that provisions in the underlying construction contract do not automatically qualify the beneficiary’s rights under an autonomous guarantee. This is particularly important in urgent interdict proceedings.
Millenium Aluminium and Glass Services CC and Another v Group Five Construction (Pty) Ltd and Another [2022] ZASCA 180	The SCA considered a JBCC-related construction guarantee that expressly disclaimed accessory or suretyship character and prescribed a detailed documentary demand mechanism.	The case demonstrates the importance of complying with the guarantee’s own written-demand, waiting-period and certification requirements while maintaining the independence of the guarantor’s obligation.
Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd and Another and a Related Matter (099/2023 and 150/24) [2025] ZASCA 64; 2025 (6) SA 552 (SCA)	The SCA considered three on-demand performance guarantees and disputes concerning autonomy, the underlying construction contracts, fraud and unconscionability. It upheld the autonomous nature of the guarantees and rejected the defences relied upon by the guarantor.	This is particularly important recent authority. It confirms that disputes concerning the underlying contract do not ordinarily defeat an autonomous guarantee and that unconscionability has not been accepted as a separate general exception to payment.
Exxaro Coal Mpumalanga (Pty) Ltd v ABSA Bank Limited (2023/028000) [2025] ZAGPJHC 499	The High Court applied established SCA principles concerning on-demand guarantees and observed that disputes between employer and contractor regarding whether breach actually occurred are generally irrelevant to the guarantor’s obligation under an autonomous demand guarantee.	The decision illustrates continued application of the autonomy principle by South African courts following the major SCA authorities.

Useful Links

Southern African Legal Information Institute provides free access to South African judgments, including the principal Supreme Court of Appeal authorities governing construction guarantees, autonomous demand obligations and guarantee interdicts.

Supreme Court of Appeal of South Africa provides access to SCA judgments and case material. Its resources include the 2025 Set Square Developments v Power Guarantees decision, which is particularly useful for the current South African position on autonomous on-demand guarantees.

JBCC publishes standard construction-contract documents and supporting guidance relevant to South African building projects. JBCC documentation should be considered together with the exact construction guarantee actually issued on the project.

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If you would like to know more about how to prevent subcontractor disputes click here.

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