Banking Guarantee (second account and modification of contract) – Court Holding

If, in a contract guaranteeing an overdraft with a bank, the principal debtor is permitted to open a second account, this will not necessarily amount to a substantial variation of the contract prejudicial to the guarantor if the contract is a continuing guarantee of all the debtor’s accounts with that bank and not merely an overdraft on the first account

NATIONAL BANK OF NIGERIA LIMITED v. AWOLESI (1964) NCLR (page 27, lines 26-40) P.C. (West)

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).