On-demand bonds and the calls that are challenged
The surety pays first and questions later, and that is exactly what the instrument is designed to do.
QScope Team · 19 May 2026 · 4 min read
An on-demand bond, sometimes called a first demand bond or a demand guarantee, obliges the surety to pay on a compliant written demand. The surety does not investigate whether the contractor was actually in default.
The underlying contract is treated as separate. That separation is deliberate and it is the source of both the instrument’s usefulness and its unpopularity.
Why they are rare in UK construction
Because a contractor giving one is handing the employer the ability to obtain the money without proving anything. The contractor can litigate afterwards to recover it, but it is now the claimant, out of pocket, arguing about money the employer already holds.
They appear more often on international projects, on export contracts, and where the employer’s own funding requires them.
Restraining a call
English courts are reluctant to interfere. The commercial value of a demand instrument depends on it being reliable, so they will not restrain a call merely because the underlying entitlement is disputed.
The recognised exception is fraud: where the beneficiary knows the demand is untrue. The threshold is high and the evidence has to be available quickly, which in practice makes injunctions rare.
Unconscionability has been recognised as a ground in some other common law jurisdictions and is not generally available in England.
What a contractor can do about it
- Resist giving one at tender, and price the difference if it must be given.
- Negotiate conditions into the demand: a requirement to state the breach, or to certify that loss has been suffered.
- Cap it, and make it reduce at practical completion.
- Make sure it expires on a defined event rather than an open date.
Each of those moves the instrument towards conditional without abandoning the employer’s certainty entirely, and a demand that has to state something is a demand somebody has to think about before signing.
What an employer should understand
That calling one on a weak entitlement is not free. The money arrives, and the contractor sues, and a call that turns out to have been unjustified is repaid with interest and costs in circumstances where the employer looks opportunistic.
The instrument gives certainty of payment. It does not give certainty of entitlement, and the two get confused precisely because the money arrives first.
QScope records the bond type against every instrument, so an on-demand bond is not filed alongside a conditional one as though they were the same thing.