A subcontractor completed bridges construction work, but the main contractor was not willing to return the performance guarantees given to it by the subcontractor, contending that this was a back-to-back relationship and thus, until the main contractor's execution guarantees were not returned to it from the customer, the main contractor was not obligated to return the execution guarantees of the subcontractor.
The Court accepted the claim and held that there was no reason to delay the return of the subcontractor's guarantee. The starting point and common-sense are that a performance guarantee is intended to ensure the execution of the works in question. A performance guarantee is not intended to guarantee the quality of the work or the period of the inspection. For this purpose, there are guarantees of quality or guarantees for the period of inspection. Therefore, it is reasonable to assume that upon completion of the execution, the guarantee will be returned to the executing contractor. The purpose of the back-to-back mechanism is to prevent the main contractor from being exposed to risks as a result of the subcontractor. If the sub-contractor has acted properly, the performance guarantee must be returned to it upon completion of the work.