LEGAL PRINCIPLE: CONTRACT LAW — Guarantees — Continuing Guarantee — Nature of
PRINCIPLE STATEMENT
A continuing guarantee is a security for the whole amount due or which may become due. Where the agreement contains a clause for determination, parties are bound by that clause and cannot resort to extraneous matters.
RATIO DECIDENDI (SOURCE)
Per Onu, JSC, in Union Bank of Nigeria Limited v. Nwaokolo (1995) NLC-2171991(SC) at pp. 12–14; Paras. D–A.
"Clause 2 of Exhibit 3 created a continuous guarantee which can only be determined as provided elsewhere in the same document. The guarantee is to be a continuing security for the whole amount due or which may become due. Where in a written agreement there is a clause for determination or the manner for bringing the same to an end, parties are bound by such a clause and recourse cannot be had to extraneous matters for the purpose."
EXPLANATION / SCOPE
A continuing guarantee covers future advances. Termination must follow the contract terms. Extraneous matters cannot override the written agreement. The principle applies to all continuing guarantees. The guarantor is bound until proper termination. The rule protects the creditor’s rights. The court will enforce the contract as written.
