Lloyd J considered a term in a guarantee agreement as follows ‘if and whenever the company makes default in payment of any such principal money [to] pay the amount thereof on demand provided that the liability hereunder of the guarantor shall be as a primary obligor and not merely as a surety.’ Referring to Heald v Connor, he said: ‘I agree with Fisher J that it is common to find a provision such as is found here in par. 5 in guarantees, and I certainly do not hold that it automatically converts every guarantee into an indemnity. But equally its operation is not confined to the consequences of giving time or other indulgence to the principal debtor, and I very much doubt if Mr. Justice Fisher intended so to confine it. In the present case it is combined with a provision for the continuance of the bank’s rights despite the release of the principal debtor’s liability by operation of law. The release of the principal debtor normally discharges the guarantor as does a binding agreement to give time. The words in par. 5 seem to me equally apt to enable the guarantor’s liability to continue as if he were the principal debtor in either case. That does not necessarily mean that he is to be regarded as the principal debtor for all purposes from the inception of the guarantee but only that the creditor is entitled to treat him as the principal debtor in certain events.’
[1979] 2 Lloyd’s Rep 255
England and Wales
Citing:
Cited – Heald v O’Connor 1971
A surety for a company’s obligations under a debenture promised: ‘if and whenever the company makes default in payment of any such principal money [to] pay the amount thereof on demand provided that the liability hereunder of the guarantor shall be . .
Cited by:
Cited – Van Der Merwe and Another v IIG Capital Llc ChD 13-Nov-2007
The parties had entered into a debt factoring agreement, under which repayment was sought of some $30m, and the claimants were said to have guaranteed the loan by the factor to their company. The court was asked whether the guarantors had the same . .
Lists of cited by and citing cases may be incomplete.
Updated: 20 July 2021; Ref: scu.261296