Caterpillar Motoren GmbH & Co K.G. v Mutual Benefits Assurance Company

Guarantee – Construction. The claimant had issued proceedings seeking payment from the defendant insurance company under advance payment bonds and performance bonds that it had issued. The claimant applied for summary judgment, contending that the bonds were 'on demand' and so the liability to pay had arisen. The Commercial Court held that there was no material difference between general principles of contractual construction and 'Paget's presumption' for the construction of such instruments. Further, Paget's presumption applied not only where a bank had issued an instrument, but also to an insurance company, in the ordinary course of its business, particularly where the language of the instrument clearly indicated an intention to create an 'on demand bond'. The claimant's application was granted where, on the true construction of the instruments, they were 'on demand' bonds.

Category: