Interpretation of performance bonds

In Master Marine SA v Labroy Offshore Ltd [2012] SGCA 27, [2012] 2 SLR 125 the Court of Appeal of Singapore considered the nature of a first demand performance bond and affirmed that, when seeking to interpret such a bond, the court should be restrained in its examination of the external context and extrinsic evidence. The need to ensure expediency in payment was held to limit the admissibility of such evidence, although it remains admissible in cases where the bond is patently ambiguous or its plain meaning suggests a meaning which is inconsistent with the obvious external context in which the contract was made. The court also affirmed that the doctrine of strict compliance applies to the interpretation of any conditions which must be satisfied before the obligation to make payment arises.