South African National Roads Agency SOC Limited v Fountain Civil Engineering (Pty) Ltd and Another

SANRAL and Fountain Civil Engineering (FCE) concluded a FIDIC Red Book construction contract in 2016 for upgrades to the R23 Freeway. FCE was required to furnish a 10% unconditional performance guarantee, which Lombard Insurance issued in SANRAL’s favour. Disputes arose after community unrest allegedly made performance impossible. FCE purported to terminate the contract on grounds of force majeure in October–November 2018 and ceased work. SANRAL disputed the lawfulness of FCE’s termination, alleged abandonment, and later issued its own notice of termination, indicating it would claim under the performance guarantee. FCE approached the High Court seeking an interdict restraining SANRAL from calling up the guarantee pending dispute resolution. The High Court granted an interim interdict and ordered the disputes to arbitration. SANRAL appealed.

The appeal was upheld with costs. The High Court’s order was set aside and replaced with an order dismissing FCE’s application with costs.

The case reaffirms South African law on unconditional performance guarantees in construction contracts, particularly under FIDIC forms. It confirms that such guarantees are autonomous instruments, enforceable on demand notwithstanding disputes or alleged force majeure under the underlying contract. It also underscores limits on judicial intervention in agreed dispute resolution mechanisms and reinforces the authority of Aveng v SANRAL.