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 topicContract 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).

Method of expression of Consideration in Contract (Holding)

Method of expression of Consideration in Contract

The way in which consideration for a contractual obligation is expressed is not conclusive, but it is relevant in construing the terms of the contract itself

NATIONAL BANK OF NIGERIA LIMITED v. AWOLESI (1964) NCLR (page 26, lines 20-23) P.C. (West)

Related aspect of Law: Consideration in Contract

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).

Banking – Guarantee – Effect of substantial modification

Banking – Guarantee – Effect of substantial modification

If, in a contract guaranteeing an overdraft with a bank, the principal debtor opens a second account without the guarantor’s knowledge and, on construction of the contract, this amounts to a substantial variation of that contract prejudicial to the guarantor, the effect is to discharge the guarantee and relieve the guarantor from liability. Where there is no substantial varia-tion the guarantee can be enforced against the guarantor

NATIONAL BANK OF NIGERIA LIMITED v. AWOLESI (1964) NCLR (page 26, line 40—page 27, line20; 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).

Banking – Guarantee (second account and modification of contract)

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).

Banker’s liability to Customer on Suggested Sufficient Fund

Banker’s liability to Customer on Suggested Sufficient Fund – Court Holding

Where a banker refuses payment of a cheque which the customer has not stopped, but to meet which there are not sufficient funds of the customer’s available, and by his answer on the cheque the banker suggests that there are sufficient funds but the customer has stopped the cheque, the answer does not amount to such an admission or representation that the customer’s funds are sufficient as will fix the banker with liability to the customer for refusing payment

ADENIILUYI v. AFRICAN CONT. BANK LTD. (1964) NCLR (page 19, lines 22-39; page 20, lines 14-22) H.C. (West)

Facts of the case

The plaintiffs brought an action to recover from the defendants, their bankers, the amount of a cheque drawn by the plaintiffs payment of which was refused by the defendants. The first plaintiff opened an account with the defendant bank in the joint names of himself and the second plaintiff.

The defendants believed that the plaintiffs held the account in trust for certain third parties, whom they, the defendants, regarded as their customers. The third parties believed there was an account in their name with the defendants designated or known as a special account. They paid in a cheque endorsed to them, to be credited to their special account, and the defendants paid the proceeds into the plaintiffs’ account.

The plaintiffs drew a cheque on the account which would have been covered by the credit balance in the account if the third parties’ cheque had been properly credited to it, but otherwise not. The third parties directed the defendants to freeze the account. The defendants marked the plaintiffs’ cheque “payment counter-manded” without the plaintiffs’ authority, and refused payment. The plaintiffs instituted the present proceedings, as holders of the account in their own right and not as trustees, alleging a breach of contract by the defendants in not paying out on the cheque out of moneys of the plaintiffs in their hands.


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

Interpretation of a Banker’s answer on dishonoured cheque

Interpretation of a Banker’s answer on dishonoured cheque – Court Holding

In interpreting a banker’s answer on a cheque of which he has refused payment, the test is not what the words might convey to a particular class of persons, but what they would ordinarily suggest to the mind of every person of average intelligence who read them

ADENIILUYI v. AFRICAN CONT. BANK LTD. (1964) NCLR (page 19, lines 31-36) H.C. (West)

Facts of the case

The plaintiffs brought an action to recover from the defendants, their bankers, the amount of a cheque drawn by the plaintiffs payment of which was refused by the defendants. The first plaintiff opened an account with the defendant bank in the joint names of himself and the second plaintiff.

The defendants believed that the plaintiffs held the account in trust for certain third parties, whom they, the defendants, regarded as their customers. The third parties believed there was an account in their name with the defendants designated or known as a special account. They paid in a cheque endorsed to them, to be credited to their special account, and the defendants paid the proceeds into the plaintiffs’ account.

The plaintiffs drew a cheque on the account which would have been covered by the credit balance in the account if the third parties’ cheque had been properly credited to it, but otherwise not. The third parties directed the defendants to freeze the account. The defendants marked the plaintiffs’ cheque “payment counter-manded” without the plaintiffs’ authority, and refused payment. The plaintiffs instituted the present proceedings, as holders of the account in their own right and not as trustees, alleging a breach of contract by the defendants in not paying out on the cheque out of moneys of the plaintiffs in their hands.


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

Meaning of ‘Payment Countermand’ on Cheque (Holding)

Meaning of ‘Payment Countermand’ on Cheque – Court Holding

The words “payment countermanded” in a banker’s answer on a cheque of which he has refused payment mean that the customer has sufficient funds available to meet the cheque but has countermanded payment

ADENIILUYI v. AFRICAN CONT. BANK LTD. (1964) NCLR (page 19, lines 31-39) H.C. (West)

Facts of the case

The plaintiffs brought an action to recover from the defendants, their bankers, the amount of a cheque drawn by the plaintiffs payment of which was refused by the defendants. The first plaintiff opened an account with the defendant bank in the joint names of himself and the second plaintiff.

The defendants believed that the plaintiffs held the account in trust for certain third parties, whom they, the defendants, regarded as their customers. The third parties believed there was an account in their name with the defendants designated or known as a special account. They paid in a cheque endorsed to them, to be credited to their special account, and the defendants paid the proceeds into the plaintiffs’ account.

The plaintiffs drew a cheque on the account which would have been covered by the credit balance in the account if the third parties’ cheque had been properly credited to it, but otherwise not. The third parties directed the defendants to freeze the account. The defendants marked the plaintiffs’ cheque “payment counter-manded” without the plaintiffs’ authority, and refused payment. The plaintiffs instituted the present proceedings, as holders of the account in their own right and not as trustees, alleging a breach of contract by the defendants in not paying out on the cheque out of moneys of the plaintiffs in their hands.


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

What constitutes a banker’s customer (Court Holding)

What constitutes a banker’s customer

A person whose money has been accepted by a banker on the footing that the banker undertakes to honour cheques up to the amount standing to that person’s credit is a customer of the banker, and the position is unaffected by the banker’s belief that the account is held in trust, nor does that make the supposed cestui que trust a customer

ADENIILUYI v. AFRICAN CONT. BANK LTD. (1964) NCLR (page 15, lines 11-15; Page 16, lines 17-22; page 16, line 40—page 17, line 4) H.C. (West)

Facts of the case

The plaintiffs brought an action to recover from the defendants, their bankers, the amount of a cheque drawn by the plaintiffs payment of which was refused by the defendants. The first plaintiff opened an account with the defendant bank in the joint names of himself and the second plaintiff.

The defendants believed that the plaintiffs held the account in trust for certain third parties, whom they, the defendants, regarded as their customers. The third parties believed there was an account in their name with the defendants designated or known as a special account. They paid in a cheque endorsed to them, to be credited to their special account, and the defendants paid the proceeds into the plaintiffs’ account.

The plaintiffs drew a cheque on the account which would have been covered by the credit balance in the account if the third parties’ cheque had been properly credited to it, but otherwise not. The third parties directed the defendants to freeze the account. The defendants marked the plaintiffs’ cheque “payment counter-manded” without the plaintiffs’ authority, and refused payment. The plaintiffs instituted the present proceedings, as holders of the account in their own right and not as trustees, alleging a breach of contract by the defendants in not paying out on the cheque out of moneys of the plaintiffs in their hands.


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

Banker must honour Customer’s draft on customer’s money in his hands (Holding)

Banker must honour Customer’s draft on customer’s money in his hands – COURT HOLDING

A banker must recognise the person from whom or for whose account he has received the money in an account as the proper person to draw on it, and cannot set up the claim of a third person as against that of his customer: whether the customer holds the account in his own right or as trustee, and in the latter case even though he draws on it for the purpose of a breach of trust, the banker is bound to honour the customer’s order with respect to money belonging to the customer in his hands; but he may show that he did not receive the money from or for the account of the customer or that it does not belong to the customer, as where the proceeds of a cheque paid in for the credit of a third person’s account have been credited to the customer’s account held in the customer’s own right and not in trust for the third person

ADENIILUYI v. AFRICAN CONT. BANK LTD. (1964) NCLR (page 17, line 32—page 18, line 36) H.C. (West)

Facts of the case

The plaintiffs brought an action to recover from the defendants, their bankers, the amount of a cheque drawn by the plaintiffs payment of which was refused by the defendants. The first plaintiff opened an account with the defendant bank in the joint names of himself and the second plaintiff.

The defendants believed that the plaintiffs held the account in trust for certain third parties, whom they, the defendants, regarded as their customers. The third parties believed there was an account in their name with the defendants designated or known as a special account. They paid in a cheque endorsed to them, to be credited to their special account, and the defendants paid the proceeds into the plaintiffs’ account.

The plaintiffs drew a cheque on the account which would have been covered by the credit balance in the account if the third parties’ cheque had been properly credited to it, but otherwise not. The third parties directed the defendants to freeze the account. The defendants marked the plaintiffs’ cheque “payment counter-manded” without the plaintiffs’ authority, and refused payment. The plaintiffs instituted the present proceedings, as holders of the account in their own right and not as trustees, alleging a breach of contract by the defendants in not paying out on the cheque out of moneys of the plaintiffs in their hands.


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

Duration of the appointment of a University Professor (NCLR)

Duration of the appointment of a University Professor – COURT HOLDING

In accordance with the practice of universities, the appointment of a professor is until retirement and is not subject to confirmation after an initial probationary period

Oyenuga and Four Others v. Ife University Provisional Council (1964) NCLR (page 7, lines 27-31) H.C. (West)

Related aspect of Law: Contract

Facts of the Case

The Plaintiff and four others brought a consolidated action against the defendants to recover salary and emoluments in lieu of notice for a specific period of time.

The Plaintiff was employed as a professor at the university of Ife under the service conditions in force in 1962. These conditions provided that appointments were tenable for three years in the first instance and, on confirmation, until retirement at 60 or 65.

However, the practice in universities was to waive the probationary three-year period in the case of a professor and to make the appointment until retirement. The Plaintiff’s appointment was terminated before the expiry of this period for alleged misconduct and he was given six months’ notice of such termination. Accordingly, the present proceedings were instituted to recover salary and emoluments.

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