Unconscionability as a distinct ground for restraining calls on performance bonds is part of Singapore law. While the Singapore judges have articulated the policy reasons for restraining performance bond on this ground, they have thus far not explained the doctrinal basis for the unconscionability exception. This point is important because it would impact on the issue of whether the unconscionability exception may be contractually excluded by the parties. This seminar will explore the doctrinal basis for restraining a performance bond on the basis of unconscionability and whether the recent Singapore Court of Appeal’s decision to allow for the contractual exclusion of unconscionability as a ground for restraint rests on sound foundation.
In addition, the present speaker surveyed all the reported and unreported case law for the past fifteen years on alleged unconscionable calls to see whether the usual criticism levelled against the unconscionability exception as being undesirable, uncertain and ultimately, weakening the integrity and utility of performance bonds in the commercial context are justified. The results of this survey will be explored in this seminar. Beyond an examination of the case law, a survey of leading construction law practitioners in Singapore in both local and international law firms was also conducted to obtain qualitative data on the unconscionability exception. The resultant picture that emerges from this study is that while unconscionability in relation to performance bonds does import a degree of uncertainty, it seems to be workable in the context of Singapore, at least in the view of the practitioners. However, the survey response shows that the trend among the larger law firms in Singapore appears to be that their clients are now excluding unconscionability from the terms of performance bonds. If this trend continues, this may spell the demise of the unconscionability exception to calls on performance bonds.