All Monies Guarantee Not Discharged by Variation of Contract

In National Merchant Buying Society Ltd -v- Bellamy & Another [2013] EWCA Civ 452 the Court of Appeal upheld the High Court’s decision that an all monies, continuing guarantee given when there was a (subsequently varied) existing specific obligation between the creditor and the underlying obligor, would not be discharged by that subsequent variation. 

The Court of Appeal rejected the Appellant’s argument that where:

(a)   there is an existing contract between the underlying obligor and the beneficiary of the guarantee;

(b)   the guarantor knows the terms of the existing contract; and

(c)   a guarantee is not limited to securing the obligations under that specific contract,

then variation of the contract would still discharge the guarantee.

As the guarantee in question was an all monies guarantee, the Court of Appeal determined that there was no reason why it should be linked to or limited by the existing contract and the appeal was dismissed.

This case provides a useful clarification of what constitutes a variation of guaranteed obligations.

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