AWOLESI V. N.B.N. LTD.

• Pages: 124-134

124

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NIGERIAN SUPREME COURT CASES

[1962] N.S.C.C.

AWOLES1 Q a N.B.N. LTD.

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5

M.S. AWOLESI

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APPELLANT

V

NATIONAL BANK OF NIGERIA LTD.

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RESPONDENT

SUIT NO. FSC 146/1961

FEDERAL SUPREME COURT

UNSWORTH,

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F.J.

TAYLOR,

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F.J.

BAIRAMIAN,

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F.J.

30th March, 1962

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Contract - Guarantee and Indemnity - Discharging of Surety -

Creditor from guaranteed Contract without Surety's consent.

Departure by

Banking - Guarantee of Customer's overdraft on current account

account insulated by bank - Substantial alteration.

- Guaranteed

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ISSUE:

1.

Whether an agreement altering a guarantee contract made without the consent

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of the surety discharges the surety of his obligations under the contract.

FACTS:

The Appellan*. auaranteed the account of one Taiwo with the Respondent to the

limit of £10,500. The account had already been overdrawn by over £8,500. The

bank as a result of the guarantee later honoured some cheques making the total

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amount overdrawn £10.096-16s-9d.

Taiwo later opened an account to which he became overdrawn by about £2,500

which resulted eventually in the bank suing Taiwo and the appellant for the total

sum of £10,025-14s-3d due under the old account. The trial Judge tied up the

three accounts and declared the appellant and Taiwo liable for the sum of £9,610-

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14s-4d owing on the three accounts (including an account which was only known

during trial).

On appeal, it was contended that the contract of guarantee had been materi-

ally altered by the opening of the subsequent account in Taiwo's name.

HELD:

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1 An agreement altering a guaranteed contract made without the consent of the

surety discharges the surety unless such alteration is so inconsequential as to

omit any prejudice.

2.

Proof of the alteration being unsubstantial must be shown or the surety will stand

discharged. The alteration here was substantial and the appeal is therefore

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allowed and judgment against the guarantor set aside.

OBITER:

(Per Bairamian, F.J.) The precedent for a Guarantee for Advances to a Cus-

tomer to be found in the Encyclopaedia of Forms and Precedents, Vol. 2, page

419, is not identical with, but looks not unlike, the form used in this case. It con-

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tains a paragraph which allows the opening of a fresh account or accounts with

provisions on appropriation. However, it provides that the liberty to open a new

account does not come into being until after the guarantee ceases to be binding

as a continuing security on the guarantor or his estate.