As good as cash? The diminution of the autonomy principle

The recent decision of Austin J in Boral Formwork v Action Makers highlights significant statutory inroads into the autonomy principle, as it applies to bank guarantees and unconditional performance bonds. To explore whether these instruments should continue to be accepted in lieu of cash retentions, this paper examines the autonomy principle and its exceptions (both common law and statutory). The conclusion reached is that the uncertain, and potentially broadening, operation of both the common law and statutory exceptions to the autonomy principle may significantly curtail the use of bank guarantees and unconditional performance bonds as cash equivalents. For a bank guarantee or unconditional performance bond to function as a risk allocation device (as well as a security), an intended beneficiary will need to routinely implement certain safeguards. Placing blind faith in the autonomy principle will no longer suffice.