, BAN5902 ASSIGNMENT 1 2026
DUE DATE: 30 JUNE 2026
Critical Discussion of Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd
and Another 2025 (6) SA 552 (SCA): On-Demand Performance Guarantees in South
African Banking Law
(a) Facts of the Case
The dispute in Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd and Another
2025 (6) SA 552 (SCA) arose from a construction-related commercial arrangement in which
Set Square Developments (the employer/beneficiary) sought to enforce an on-demand
performance guarantee issued by Power Guarantees (the guarantor/bank). The guarantee
had been issued to secure the obligations of a contractor (the principal debtor) in respect of
construction performance obligations.
A key feature of the guarantee was that it was framed as an “on-demand” instrument,
meaning that payment was to be made upon written demand by the beneficiary, without
the need to prove breach of the underlying construction contract. When disputes arose
between Set Square and the contractor regarding alleged non-performance and defective
work, Set Square made a demand on the guarantee. Power Guarantees resisted payment,
relying on allegations related to fraud and/or abuse of the guarantee mechanism, arguing
that the underlying dispute between the parties justified refusal to honour the demand.
Thus, the central factual tension was between the autonomy of the guarantee instrument
and attempts to resist payment based on underlying contractual disputes between
employer and contractor.
DUE DATE: 30 JUNE 2026
Critical Discussion of Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd
and Another 2025 (6) SA 552 (SCA): On-Demand Performance Guarantees in South
African Banking Law
(a) Facts of the Case
The dispute in Set Square Developments (Pty) Ltd v Power Guarantees (Pty) Ltd and Another
2025 (6) SA 552 (SCA) arose from a construction-related commercial arrangement in which
Set Square Developments (the employer/beneficiary) sought to enforce an on-demand
performance guarantee issued by Power Guarantees (the guarantor/bank). The guarantee
had been issued to secure the obligations of a contractor (the principal debtor) in respect of
construction performance obligations.
A key feature of the guarantee was that it was framed as an “on-demand” instrument,
meaning that payment was to be made upon written demand by the beneficiary, without
the need to prove breach of the underlying construction contract. When disputes arose
between Set Square and the contractor regarding alleged non-performance and defective
work, Set Square made a demand on the guarantee. Power Guarantees resisted payment,
relying on allegations related to fraud and/or abuse of the guarantee mechanism, arguing
that the underlying dispute between the parties justified refusal to honour the demand.
Thus, the central factual tension was between the autonomy of the guarantee instrument
and attempts to resist payment based on underlying contractual disputes between
employer and contractor.
