You know what a guarantee is. The problem is the wording and who it protects when things go wrong on site.
Under certain guarantee structures, an employer can make a call without first proving you defaulted. If the demand meets the wording, the guarantor pays. Your security is then used to reimburse the guarantor, before the dispute is resolved, before default is proven, before you have had a proper opportunity to respond.
That is the risk buried in on-demand guarantee wording. And many contractors are being pressured to accept it at tender stage with little room to push back.
The difference that matters
Conditional / surety-style guarantee
Default must be established before the guarantee pays out. Legitimate triggers include:
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- Liquidation or business rescue
- Abandonment of site
- Failure to complete the works
- Failure to fix defective work after proper notice
- Lawful termination of the contract
- Proven financial loss suffered by the employer
The dispute is dealt with first. Default is established. Then the guarantee responds. Employers are protected against genuine non-performance, not mere disagreement.
On-demand guarantee
No proven default required. If the demand complies with the wording, the guarantor pays. The employer does not need to establish loss, prove breach, or wait for the dispute to be resolved.
Your assets are on the line before anyone has proven you did anything wrong.
Once the guarantor pays out, they recover from the security behind your facility – cash collateral, pledged assets, mortgage bonds, personal sureties. A single large call, or several smaller ones, can collapse a facility fast. Cash flow disappears. Suppliers react. Projects stall. For some businesses, it ends there.
The real issue
Contractors are not asking to escape accountability for genuine default. Employers deserve protection when a contractor truly fails to perform.
The issue is this: on-demand wording allows a guarantee to be called before default is proven, before the dispute is ventilated, and before the contractor has had a fair chance to respond. That is not a balanced instrument. And at tender stage, many contractors feel the choice is accept it or lose the work.
CivilSure is asking directly: has the balance of risk shifted too far?
In plain terms
On-Demand
Pay first, Argue Later
Conditional / Surety
Prove the default first, then the guarantee responds.
Have your say
CivilSure is gathering real feedback from South African contractors on guarantee wording, on-demand exposure, and JBCC-style contracts. Anonymous. Takes less than a minute.
Would you sign a guarantee that could be called before default is properly proven?
