“Demand” Must Be Made
Letter/Notice of demand (in writing) shall be made. In Teknik Cekap Sdn. Bhd. v. Public Bank Bhd.[i], Shaik Daud JCA added:
There is no doubt that some performance bond must be paid merely on a demand being made, and whether this is so must depend on the wordings of the bond itself. In Kirames Sdn Bhd v. Federal Land Development Authority [1991] 2 MLJ 198 the guarantee provides that the guarantor shall irrevocably and absolutely guarantee payment on demand without having to assign any reason whatsoever for such demand.
In Merit Properties Sdn Bhd v. Aktif Lifestyle Stores Sdn Bhd & anor[ii], Richard Malanjum JCA states:
It is a matter of construction. If the said guarantees are ruled to be unconditional, it would give the appellant the right to call upon the said guarantees and the 2nd respondent would have to make payments on the 1st and 2nd guarantees pursuant to the demand made by the appellant. … The 1st guarantee was "on demand” … All that is required to trigger payment is a demand in writing. … In fact, the present performance bond, had it been worded, eg to require any proof of breach by the buyer so as to deserve any payment, then, in such event, its commercial acceptability as a performance bond, would be mostly lost.
We shall note that, in Esso Petroleum Malaysia Inc v. Kago Petroleum Sdn Bhd[iii] , the then Supreme Court ruled 'the performance bond was, on a true construction, a pure "on demand" guarantee, and all that was required to trigger them was a demand in writing.
