In deciding what form of bond to use, principals should consider using on-demand bonds over conditional bonds. In Arrow, the Bond was a conditional bond, meaning there was only an obligation on Vero to release the Bond if certain conditions were met. Arrow’s argument would have had no weight if the Bond had been a pure on-demand bond, as Vero would have had an absolute obligation to release the Bond, regardless of whether the Engineer had correctly certified the amounts owed. Principals could also consider including a clause in their construction contracts and/or bonds that precludes the contractor from interfering with the principal recovering payment under a bond, by for example, applying for an injunction as in Arrow. In Arrow, the Court placed significant weight on the inclusion of a clause in the Contract and Bond that provided that Vero was still liable to release the Bond to Project 29 regardless of any disagreement between Arrow and Project 29 as to the amount owed. The purpose of such a clause is to prevent principals from being disadvantaged from having access to a bond simply because the contractor, or the contractor’s liquidator, disputes the amount owed. It is also important to carefully consider what performance security should be in place when negotiating construction contracts. Bonds operate as a financial remedy only and will not remedy incomplete or deficient works. In appropriate circumstances, principals should consider whether a parent company guarantee should also be obtained in conjunction with a bond as a practical remedy in regards to performance. About the authors James Dow Senior associate James is an infrastructure, major projects & construction lawyer with extensive experience in New Zealand and the United Kingdom. He advises clients in both the private and public sectors on complex projects, developments and debt funded projects and has advised extensively on project procurement and bankability. Katie shorter senior associate Katie is a construction and infrastructure lawyer with experience in advising on public and private construction and infrastructure projects in New Zealand, including in the government, transport, forestry and property development sectors. MinterellisonRuddWatts