Contract-Guarantee-Loan-Guarantee to pay debt of another must be under seal unless supported by valuable consideration-Whether for-bearance to sue sufficient consideration for guarantee.

Appeal from the High Court (West).

HELD:

(1)     Exhibit D was a guarantee to pay the debt of another and must normally be under seal; but if it was supported by valuable consideration, it need not be under seal.

(2)     A forbearance to sue or to take the principal debtor to Court, given at the request of the guarantor, is sufficient consideration for the guarantee. In this case the agreement on the 11th March, 1965 in exhibit D, at the instance of the 2nd defendant, to payment of the debt by monthly instalments of £100 with effect from 1st August, 1965, instead of in one lump sum immediately, was clearly indicative of the plaintiff's for-bearance to sue.

(3)     Moreover, the plaintiffs agreement, as set out in the document (exhibit D), to accept a smaller sum in discharge of the larger debt was also ample consideration for the guarantee given by the second defendant.

Appeal allowed: judgment of High Court with respect to second defendant set aside: judgment for the plaintiff against second defendant entered:

Cases referred to:

Crears v. Hunter (1887) 19 Q.B.D. 341.

Oldershaw v. King 2 H. and N.339.

B.W.A. Limited v. Fagbowan (1961) W.R.N.L. 227.

APPEAL from the High Court (West).

Onalaja (with him, Soremi) for the appellant.

Respondent absent and not represented.

Ademola, C.J.N. (delivering the judgment of the court)-In the Ibadan High Court in Suit No. I/121/66 the plaintiff (now appellant) claimed against the defendants the sum of £1,521-Os-0d being the total amount of loans which he made to the first defendant between 1964 and 1966. The second defendant was sued as the guarantor of the first defendant in respect of the said loans.

Madarikan, J. (as he then was) gave judgment for the plaintiff in respect of the claim against the first defendant but dismissed his claim against the second defendant.

In paragraphs 4 to 9 of his statement of claim, the plaintiff averred as follows:-

"(4)    From time to time since 1964 the 1st defendant borrowed several sums of money from the plaintiff in Ibadan and the total amount as at 11-3-65 stood at £1,521. (One thousand, five hundred and twenty one pounds).

(5)     Around March 1965, the plaintiff insisted on getting an immediate repayment from the 1st defendant and reported to the police and also determined to sue the 1st defendant for the recovery of the debt.

(6)     The 1st defendant had given plaintiff several cheques in part payment of the said debt but the cheques had been returned from the bank with remarks "returned to drawer" or "account closed."

(7)     In March 1965, the 2nd defendant, despite several reproaches from both plaintiff and others not to intervene, appealed and begged the plaintiff to desist from court or police action in this matter and promised the plaintiff that the 1st defendant will pay the said debt of £1,521 according to stated monthly instalments.

(8)     The 2nd defendant there and then promised and agreed with the plaintiff that he would stand as surety for the 1st defendant and if the 1st defendant failed to pay as agreed he himself would pay and the 2nd defendant executed an agreement to this effect before witnesses on 11-3-65.

(9)     As a result of 2nd defendant's intervention in this matter and in consideration of 2nd defendant becoming 1st defendant's surety, the plaintiff desisted from taking court action at that time and agreed for the debt to be paid as per the arrangement suggested by the 2nd defendant."

Both defendants, in their joint statement of defence, denied the above averments. In addition, the second defendant averred that he was never a surety or guarantor of the first defendant.

At the trial, the plaintiff testified that he made the various loans to the first defendant between 1963 and 1964. To pay off the amount owing the first defendant gave him eight post-dated cheques (exhibit A-A7). When the first four of the cheques became due, he presented them for payment but they were returned unpaid, exhibits A and A1 being endorsed "refer to drawer" while A2 and A3 were endorsed "account closed." On receiving the cheques with these endorsements, the plaintiff reported the matter to the police who as a result invited the 1st defendant to the police station for questioning. He then described how the 2nd defendant came into the matter as follows:-

"Later 2nd defendant came to my shop and intervened in the matter. In the presence of Saliba and Gamra, the 2nd defendant entered into an agreement to pay me the amount due from the 1st defendant."

The contents of the agreement dated 11th March, 1965, (exhibit D) are as follows:-"Mr Racheed Chidiak statement of Account:-

To the amount owing Arrears of rent for four years

£1,521         By cheque 219/A 30-9-64                         36378                                   150

                    By cheque                                                 36380                                   200

600              By cheque                                                 36381                                   200

                    By cheque                                                 36382                                   200

                    By cheque                                                 36383                                   200

                    By cheque                                                 36384                                   200

                    By cheque                                                 36385                                   200

                    By cheque                                                 36386                                   171

                                                                                                          £1,521

4 years rent                                                                                         600

£2,121                                                                                              £2,121

I, Mr Najib chidiak of Lebanon Street, Ibadan, do hereby stand surety for Mr Racheed Chidiak in settlement of the above account by monthly instalment of (£100) One hundred pounds as from 1st of August, 1965. This agreement was reached after Mr John Younis has been vigorously persuaded to reduce two years rent of £300 remaining the balance to be settled as already stated above. (£1,821) One thousand, eight hundred and twenty one pounds.

Failing to comply with this agreement, the whole amount is due for payment at any month he may drop.

Najib Chidiak Surety

Witnessed by (Sgd.) M. K. Saliba. (Sgd.) C. Gamra."

In the statement (exhibit G) which the 1st defendant made to the police on the same day on which the 2nd defendant executed the above agreement (exhibit D), the 1st defendant stated that he had agreed with the plaintiff "to settle the matter out of police hands and court."

This settlement was confirmed by the PW2 the police constable who recorded the statement (exhibit G), when in answer to a question asked under cross-examination, he stated that-

"The matter was settled between the parties."

In his own defence, the 2nd defendant, who is the only defendant concerned in this appeal, admitted that he read and signed the document (exhibit D) after the police had suggested that they should settle the case at home. He further stated that before he signed the document, the first defendant agreed that he was owing the sum of £1,821 shown therein.

As we have indicated earlier, the learned trial Judge, notwithstanding the above admission, dismissed the case against the 2nd defendant after finding as follows:-

"It was part of the plaintiff's case that the liability of the 2nd defendant arose out of exhibit D. In my view, the 2nd defendant is not liable because:-

(1)     Exhibit D is a contract of guarantee not under seal and not supported by valuable consideration, and