Performance bonds in Qatar — contracts strike back

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Queries raised by Al Tamimi’s clients in recent months, and discussions in wider industry circles in Qatar, would indicate that there is a high incidence of seemingly arbitrary calls on performance bonds, causing real headaches to contractors in this jurisdiction.

This article sheds some light on the treatment of performance bonds under Qatari law. In particular, it identifies the ways in which a contractor may resist the arbitrary encashment of such instruments.

All standard form construction contracts (and many bespoke contracts) require the Contractor to submit a Performance Bond to the Employer as a form of guarantee in respect of the former’s performance of the contract works. In the event that a Contractor breaches its contractual obligations, the Employer has the option to recoup some or all of his losses by making a call on the Performance Bond, in addition to having recourse to any other available contractual or legal remedies. As such, Performance Bonds are merely intended to operate as guarantees, and not advance payments in respect of monies which a court or arbitral tribunal may or may not later award to the Employer at a merits hearing…

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