Therefore, when is a performance guarantee an on-demand guarantee and when is a conditional guarantee, similar to a guarantee agreement? This issue was addressed by the Supreme Court of Appeal (SCA) in the case of Mutual – Federal v KNS Construction (208/15)  ZASCA 87 (May 31, 2016). A legal requirement is a requirement that is made by a legally authorized person and is appropriate in terms of form, time and place. On-demand guarantees are primary independent obligations imposed on a guarantor to pay a guaranteed amount. The obligations are independent of the main contract and are usually triggered by a written request to the guarantors. On the other hand, conditional guarantees are guarantees that can only be paid if a particular condition is met primarily related to the performance of the contractor or subcontractor. A requirement is a strong assertion that there is no doubt as to its legal strength and impact. This is a request that is made with authority. Kns submitted that the guarantee was an on-demand guarantee and was therefore payable in the event of an application. On the other hand, Aqua submitted that the guarantee was a conditional guarantee related to the contractual benefit and that the condition of use of the guarantee was not met.
In the end, the SCA found that the language used in the mutuality and federal level guarantee was similar to that used in the Zanbuild case, and it appeared that the parties` real intention was to have a conditional guarantee to ensure That Aqua complied with their contractual obligations. In other words, Mutual-Federal did not assume a primary and independent obligation to pay under the guarantee, but only a conditional payment obligation in the event of Aqua`s breach. The SCA also indicated that, although the claim under the guarantee is left to THE discretion of KNS, this does not change the nature and form of the guarantee, since the assessment of KNS must always be exercised arbitrio bono viri – which means in good faith. Each time you enter into a legal agreement, you can define a requirement that must be met for that agreement to be complete. This provision could set some limit to the agreement. For example, if you operate a fencing business and offer a sale, you can specify that the fence must be ordered until a specific date to get the sale price. For his part, your client may decide that the work must be completed before the soil is frozen.