CONTRACT LAW — Guarantees — Guarantor’s Liability Crystallises Upon Default of Principal Debtor
Principle Statement
The liability of a guarantor becomes due and mature immediately the debtor/borrower becomes unable to pay its outstanding debt. The guarantor's liability is then said to have crystallized.
Ratio Decidendi (Source)
Per Ogbuagu, JSC, in Auto Import Export v. Adebayo (2005) NLC-491997(SC) at p. 65; Paras A–B.
"The liability of a/the guarantor, becomes due and mature, immediately the debtor/borrower, becomes unable to pay its/his outstanding debt. The guarantor's liability, is then said to have, crystallized."
Explanation / Scope
Guarantor’s liability crystallizes when the principal debtor defaults or becomes unable to pay. The creditor may then demand payment from the guarantor. The principle applies to contract law and guarantees. The rule triggers the guarantor’s obligation without requiring judgment against the principal debtor. The guarantor cannot require the creditor to exhaust remedies against the principal debtor first unless the contract so provides.
