Date: March 25, 2010
Applicant: Wereilu Technical and Vocational Education and Training Institute
Respondent: Neb Insurance Company

Case Summary:
The case concerns a dispute over the advance payment and performance guarantee contract, which has been brought to this hearing for examination. The applicant filed an appeal against the decision of the Federal Supreme Court of Appeal in Case No. 130618, dated May 8, 2009, asserting that the decision was fundamentally flawed in law and should be corrected.

Origin of the Case:
The dispute originated when Soyas Construction Co., Ltd. (the plaintiff) filed a lawsuit at the Amhara Regional Supreme Court, claiming the defendant, the Wereilu Technical and Vocational Education and Training Institute (the applicant), had failed to pay Birr 708,271.42 for the work completed on a technical training institute. The defendant argued that the contract had not been properly formed, and that the work was defective, thus not meeting the required quality standards.

Additionally, the defendant counterclaimed, asserting that the plaintiff had not completed the work as per the contract, and sought a penalty of Birr 357,692.85. The intervener (Neb Insurance Company, the respondent) was held jointly liable for the advance payment and performance guarantee, and the defendant sought compensation for costs incurred in hiring another contractor to complete the work.

The plaintiff denied the allegations, arguing that the defendant had provided a performance bond of Birr 917,502.11 and that it had not been renewed, thus releasing the respondent from its obligations. The defendant, in turn, argued that the contract had not been properly extended, and they were not obligated to pay beyond the original contract period.

After reviewing the case, the court ruled that the plaintiff's work was of poor quality, leading to the termination of the contract. However, the respondent, Neb Insurance Company, did not deny providing an advance payment and performance guarantee. The court determined that the defendant and the respondent were jointly responsible for paying Birr 316,168.11 to the defendant.

Appeal to the Federal Supreme Court of Appeal:
Dissatisfied with the decision, the respondent filed an appeal, which concluded that the lower court had erred by allowing the respondent to be held liable without sufficient evidence of the plaintiff's breach. The court reversed the lower court's decision.

The present applicant (Wereilu Technical and Vocational Education and Training Institute) argued that the guarantee agreement remained valid until May 17, 2003, and should be extended for a year, making it valid until May 17, 2004. The applicant requested that the Federal Supreme Court's decision be reversed, citing a fundamental legal error in the previous ruling and seeking damages and costs.

Court's Findings

The Cassation court examined the case in light of the relevant legal provisions. The dispute centered on the advance payment and performance guarantee issued by the respondent to ensure the completion of the construction work under the original contract. The plaintiff had completed only 53.47% of the work before abandoning the project. The defendant claimed that the plaintiff did not fulfill the contractual obligations, and the respondent argued that they were not notified of defects in writing, which was a requirement under the terms of the performance bond.

The Federal Supreme Court of Appeal ruled that the plaintiff had not provided sufficient written evidence of the defects, and thus, the defendant could not be held responsible for fulfilling obligations under the performance bond. According to the terms of the bond, the employer (the defendant) must notify the guarantor of any defects before claiming compensation.

The court highlighted that the applicant had not met the necessary conditions to claim compensation under the performance bond because they did not notify the respondent of the defects in the work in a timely manner. As a result, the respondent could not be compelled to fulfill its obligations under the bond.

Decision:
The Federal Supreme Court of Appeal's decision in Case No. 130618, dated May 8, 2009, is upheld as it does not contain any fundamental legal error. The decision to dismiss the applicant's judicial request is confirmed.

Conclusion:

The decision of the Federal Supreme Court of Appeal in Case No. 130618 dated May 8, 2009, is upheld in accordance with Article 348 (1) of the Federal Supreme Court of Appeals, as it does not contain any fundamental error of law.