K.D.A. Hettiarachchi vs Ceylinco Insurance Company Limited – SC APPEAL 166/2014-2025

In the case between K.D.A. Hettiarachchi, Premasiri Super Market (Respondent) and Ceylinco Insurance Company Limited (Appellant/Respondent), the court addressed whether the performance bond (P4) issued in connection with a construction contract constituted an on-demand guarantee or a conditional bond necessitating proof of default and quantification of damages. It was determined that the bond was conditional, requiring the beneficiary to establish the contractor’s default and demonstrate the actual quantum of loss suffered. The findings established that the Plaintiff had not discharged the evidentiary burden of proving damages resulting from the alleged breach. Accordingly, the appeal was dismissed, reaffirming the principle that a guarantor’s liability under a conditional bond arises only