Bond-voyage: Court guidance for on-demand bond call-ups

In The Renaissance Club at Archerfield, LLP v BVB Sureties Limited [2026] CSOH 67, the Outer House of the Court of Session provided importance guidance on the strictness of compliance required for demand letters under on-demand performance bonds, the effect of including non-exhaustive defect lists, and the validity of signatures on behalf of limited liability partnerships.

Lord Sandison found in favour of The Renaissance Club at Archerfield, LLP (“Renaissance”), ordering the bond provider, BVB Sureties Limited (“BVB”) to pay the full guaranteed sum of £1,251,638.80.

Background

The dispute arose from a design and build contract for a residential development in East Lothian carried out by Taylor’s Property Developments (Yorkshire) Limited (“Taylor”) for Renaissance. In May 2024, BVB granted an on-demand performance bond capped at £1,251,638.80 to secure Taylor’s performance of its obligations to Renaissance.

In September 2025, following alleged defaults by Taylor, Renaissance issued a formal demand to BVB for the full bond amount. The demand letter referenced loss in excess of £1.8 million resulting from defective works, citing specific contractual clauses alongside an illustrative list of 18 defects. The letter was signed by a member of Renaissance purporting to be the “general partner”.

BVB refused to pay, contending that the demand was invalid because it relied on a non-exhaustive list of breaches rather than specifying each single defect, which BVB argued did not comply with the bond calling up requirements. BVB also argued that a “general partner” could not bind an LLP because LLPs do not, technically, have general partners.

Rulings

Challenge 1: conformity and specification of breaches

BVB argued that strict compliance with the calling up requirements stated in the bond was necessary for the demand to be valid, and that this required the demand letter to explicitly state each factual matter that was said to constitute a breach, and to link each to a specific contractual clause. BVB argued that non exhaustive lists as presented here leave the bond in uncertainty, exposing BVB to abuses of the bond by a wrongful demand and to arbitrary claims.

The court rejected BVB’s arguments finding that commercial common sense applied. The court considered that the bond expressly required only “brief details” of the failures which had led to the losses claimed under the bond. The court also held that providing supplementary details of other defects in the demand was extra information that did not mislead the recipient and did not invalidate the bond.

As part of its analysis, the court reviewed the doctrine of strict compliance applicable to performance bonds. It considered that divergence from a prescribed form of demand via additional information is only material and fatal if it naturally leads to a different legal consequence or is calculated to mislead a reasonable recipient. Because the core contractual assertions were clearly stated in the letter, adding an illustrative list of 18 specific defects did not alter the demand’s legal effect or create genuine ambiguity to cause it to fail.

Challenge 2: validity of signatory and capacity

BVB argued that the demand was invalid because it was signed by someone designated as a “general partner” which BVB contended was a capacity not founded in law, which would in turn fail to demonstrate formal authority. The court rejected BVB’s argument considering that as the letter was on official letterhead, explicit in its terms, requested payment to Renaissance, and was clearly issued on behalf of Renaissance, then it would necessarily stand as an official demand. As a reasonable person would have inferred that the letter was signed for Renaissance, the court considered that the addition of “general” to “partner” was harmless to the claim.

Legal analysis

The court reaffirmed the foundational principle of on-demand guarantees, that issuers pay against documents that on their face conform to the agreement. An issuer can look behind a document that purports on its face to be issued by an authorised representative only if it has positive knowledge of fraud or forgery. A reasonable recipient reading the letterhead and signature block would have no doubt that the demand was signed and issued on behalf of the LLP.

This decision offers significant reassurance that Scottish courts will take a commercially sensible approach to unilateral demand notices, resisting technical defences raised by guarantors seeking to avoid payment.

If you would like help with calling up your own bond, or have any questions, please contact a member of our Construction, Engineering and Infrastructure Disputes team.

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