JUDGMENT OF PALL JA
The facts giving rise to this appeal are that by a contract dated 10th April, 1986, (the contract) Nyali Beach hotel Limited (the Hotel) employed Actaf Construction Limited (the contractor) to construct a new wing adding 54 bedrooms to their hotel at Mombasa and to carry out some associated siteworks as shown on the contract drawings at an agreed cost of Kshs.19,459,246.50 subject to the conditions attached to the contract. Condition 31 of the said conditions reads as follows:-
“The contractor shall provide one surety who must be an established bank insurance company or fidelity guarantee corporation to the approval of the architect who will be bound to the employer in the sum equivalent to 10% of the contract sum for the due performance of the contract until the certified date of practical completion.”
According the contractor commenced the construction work and as its request Corporate Insurance Company Limited (the appellant) provided a bond (the bond) which in per…