Fatwa Summary: MJLA Fatwa 242799712 (Confiscation of Performance Bond after Execution at Contractor’s Expense)

The Ministry of Justice and Legal Affairs held that the confiscation of a performance bond is a contractual penalty that may only be imposed where a law, regulation, or the contract expressly provides for it. Neither the Tender Law nor the 1999 Standard Contract for the Construction of Buildings and Civil Works permits a government entity to confiscate a contractor's performance bond when it withdraws the works and executes them at the contractor's expense. Once the entity has recovered its price differences, delay fines, and expenses from the contractor, the 1999 Standard Contract requires it to return the bond.