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CREDITOR CAN PROCEED AGAINST A GUARANTOR FOR DEBT GUARANTEED

Dictum

I dealt with the meaning of a Guarantee and referred to the case of Trade Bank PIc v. Khalid Barakat Chami (2003) 13NWLR (Pt.836) 158 @ 216. I also referred to Fortune International Bank PIc v. Pegasus Trading Office (GmbH) and @ Ors. (supra) – Where it was stated by Uwaifo, JSC, that the tendency is that the law appears to have moved to the centre to make the right of the creditor less conditional. That the creditor is now entitled to proceed against the guarantor without or independent of the incident of the default of the principal debtor. I also referred to the observation of Ayoola, JSC, in the case of African Insurance Development Corporation v. Nigeria (LNG) Liquefied Natural Gas Ltd. (2000) 4 NWLR (Pt.653)494 @ 505-506; (2000)2 SCNJ, 119; (2000) 2 S.C. 57. I then stated that it is settled that the liability of a guarantor becomes due and mature immediately the debtor/borrower becomes unable to pay its/his outstanding debt. That the guarantor’s liability is then said to have crystallised. I referred to some other decided authorities in this regard and stated that a Surety or Guarantor, is bound by the written agreement it/he entered into. – Ogbuagu JSC. Nwankwo v. Ecumenical (2007)

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WHAT IS A SECURED DEBT

A secured debt is a debt on which payment is guaranteed by an asset or a lien. This means that a secured debt has collateral to reduce the risk associated with lending, such as mortgage. Where the borrower defaults on payment, the bank seizes the mortgage property, sells it and uses the proceeds realized to pay back the debt as the property is liable to forfeiture. — M.L. Shuaibu, JCA. Ekpo v GTB (2018) – CA/C/324/2013

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CREDITOR CAN PROCEED AGAINST THE SURETY WITHOUT NOTICE

If there had been no such agreement as to payment on demand, it has been said that, “the fact that the obligation of the guarantor arise only when the principal has defaulted in his obligation to the Creditor does not mean that the creditor has to demand payment from the principal or from the surety, or give notice to the surety, before the creditor can proceed against the surety.” See; Andrew & Millet. Law of Guarantee. 1st Edition page 162. African Insurance Development Corporation V. Nigeria Liquefied Natural Gas Ltd. (2000) 4 NWLR (Pt. 653) 494 at 505. Fortune International Bank Plc. V. Pegasus Trading Office (Gmbtt) & Ors (2004) 1 SCM 21 at 31 (2002) All NWLR (Pt. 199) 1312 at 1325.

— O. Ariwoola, JSC. African Intl. Bank Ltd. v Integrated Dimensional System (2012) – SC.278/2002

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UNLESS AGREED, NOTICE NOT NEEDED BEFORE COMMENCING PROCEEDING AGAINST PRINCIPAL DEBTOR

The fact that the obligations of the guarantor arises only when the principal debtor has defaulted in his obligations to the creditor does not mean that the creditor has to demand payment from the principal debtor or from the guarantor or give notice to the guarantor before the creditor have to commence proceedings against the principal debtor unless there is an express terms in the contract requiring him to do so. See C.B.N V INTERSTELLA COMMUNICATIONS LTD (2018) 7 NWLR (Pt. 1618) 294 at 494. — M.L. Shuaibu, JCA. Ekpo v GTB (2018) – CA/C/324/2013

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WHEN IS A DEBT SAID TO HAVE ARISEN?

In AG Adamawa State & Ors. V. AG Federation (2014) LPELR – 2322 (SC), the Supreme Court per Muhammed JSC, had reiterated inter alia thus: “In financial terms, any amount of money which is still owed after some payment has been made is what is called a balance. It remains a debt on the neck of the debtor. Limiting it to financial dealings, ‘debt’ … represents a sum of money due by certain and express agreement. It is a specified sum of money owing to one person from another, including not only obligation of debtor to pay, but right of creditor to recover and enforce payment.”

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