b'BENCHMARKSbe paid by the financial institution if the co-contracting party fails to perform The decision of the majority of the Court its obligation, subject only to thefraud exception.is a reminder for those in the construction The Court also commented that courts must be very slow to interfere with a demand on a letter of credit becauseindustry that letters of credit guaranteeing it impairs the reliance that the industry places upon such instruments. A letter ofperformance, or guaranteeing other credit is autonomous from the contract between the contracting parties, beingobligations for a project, are nearly absolute an obligation of the financial institution guaranteeing a partys performance. Therefore, any disputes between thein the obligation to pay upon demand.parties concerning the underlying contract are usually irrelevant to the demand on the letter of credit. So long as the beneficiary strictly complies with the terms of demand, payment will be made. TheFrom the terms often involve making demand in a certain manner, within certain timeframesremote arctic and at a certain place of business of the financial institution.tundra to the In this extraordinary case, the Court did,NEW MODULAR RCMP DETACHMENT modern city, however, apply the one exception to the financial institutions obligation to payNORWAY HOUSE FIRST NATION, MANITOBA and everything upon demand. The Court decided that the Ministry perpetrated a fraud as beneficiaryin between.under the primary letter of credit. The Greek bank had knowledge of the fraud, yet called for payment from the Canadian bank. The Canadian bank, havingFor the past ve decades, knowledge of the true state of affairsCon-Pro Industries has built before it paid on the demand, was rightly enjoined by the lower Court from payingsuccessful projects from the High any amount under the letter of credit. Arctic to large urban centres, from NEW COMMUNITY SCHOOL expansive new builds to retrots TAKEAWAYS FOR THE INDUSTRY DAUPHIN RIVER FIRST NATION, MANITOBAThe decision of the majority of the Courtand renovations. is a reminder for those in the construction industry that letters of credit guaranteeingBacked by 55 years of knowledge performance, or guaranteeing otherand experience, we leverage obligations for a project (such as damagesthis expertise to help our clients or contractual holdback), are nearly absolute in the obligation to pay uponnavigate the construction process demand. In this way, letters of creditand achieve project success. differ from bonds, which allow a surety to raise defences relating to the underlyingLets work together. Call us dispute, such as whether a party is inNEW SOUTHEST COLLEGIATE AND STUDENT LODGEdefault and whether the claim falls withinWINNIPEG, MANITOBA at 204.233.3717 to begin turning the coverage provided by the bond. Whenyour project dreams into letters of credit are provided, it is very rareconstruction reality.indeed that the one and only exception to payment will apply. Usually, the underlying dispute is irrelevant and the financial institution will make payment on the letter of credit so long as its strict terms www.conprocanada.caare met. If you have any questions about letters of STARBUCKS CANADA CORYDON AVENUE RETROFITcredit, the lawyers at MLT Aikins are WINNIPEG, MANITOBApleased to assist.Issue 2 | Summer Edition | 2024 BUILD MANITOBA 33'