BD4.5 million guarantee ruling over payment delays overturned

TDT | Manama

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A BD4.5 million dispute over a guarantee has been overturned by the Court of Cassation, which ruled that delays in payment had voided the guarantor’s liability, exposing a gap in the contract’s terms that shifted the burden of payment.

The ruling quashed a decision that had required a guarantor for a company supplying and installing water filters to cover the sum owed to another firm after the supplier failed to meet its contract.

The court stated: “A guarantee must be read in its narrowest sense, in favour of the guarantor. The respondent company delayed payments, affecting the guarantee’s standing.”

The dispute arose when the respondent firm filed a claim against the appellant in the High Civil Court, demanding BD4.5 million, BD10,000 in damages, and BD1,500 in expert fees.

Deal

It argued that, under a joint guarantee, the appellant had vouched for the supplier’s commitment and proper execution of a deal to provide four water filter production lines for $21 million, of which $20 million had already been paid.

As the supplier failed to meet its obligations, the GCC Commercial Arbitration Centre ordered it to pay $11.6 million, which matched the amount being claimed in court.

The appellant, however, refused to settle the shortfall, arguing that the contract terms had not been met.