Modification-contract of guarantee-action against surety (Holding)

Modification-contract of guarantee-action against surety – Court Holding

Where, in a contract of guarantee, there is a further agreement between the principals relating to the contract of guarantee and the surety is not consulted, a court will not, in an action against the surety, inquire into the effect of the alteration if there is some doubt as to whether the alteration is unsubstantial or one which cannot be prejudicial to the surety, but will hold that, in such a case, the surety himself must be the sole judge

NATIONAL BANK OF NIGERIA LIMITED v. AWOLESI (1964) NCLR (page 27, lines 9 –20) P.C. (West)

Related topic – Contract in Law

Facts of the case

The appellant bank brought an action against the respondent ill the High Court of Western Nigeria for money due under a guarantee for the loan of money. The appellant permitted one of its customers overdraft facilities, later guaranteed by the respondent. The customer later opened a second account, unknown to the respondent, with the appellant. No further cheques were drawn on the first account, although a small amount was paid in.

The account, however, remained overdrawn. All further business was conducted through the second account. The appellant wrote to both customer and respondent demanding collateral security for the overdraft on the first account and a substantial reduction in the amount of the overdraft. When neither of these requests were complied with the appellant instituted proceedings against them in the High Court of Western Nigeria.

Ack: Alan Milner. All Rights Reserved (LawHub NG).