CLETUS UMEGU

(Alias Coco Master)

V.

1.DAVID OKO
2.EDWARD UTSU

COURT OF APPEAL
(CALABAR DIVISION)
CA/C/12/2000
DENNIS ONYEJIFE EDOZIE, J.C.A. (Presided)
OKWUCHUKWU OPENE, J.C.A.
SIMEON OSUJI EKPE, J.C.A (Read the Leading Judgment)

MONDAY, 23RD APRIL, 2001

CONTRACT- Contract of guarantee - Ingredients of.

CONTRACT - Contract of guarantee - Nature of-Need for strict compliance

therewith.

CONTRACT - Contract of guarantee - Need to be in writing.

CONTRACT - Guarantee - Admission of liability by principal debtor - Whether

amounts to admission by guarantor.

GUARANTEESHIP - Contract of guarantee - Admission of liability by principal

debtor - Whether amounts to admission by guarantor.

GUARANTEESHIP - Contract of guarantee - Ingredients of.

[2001] 17 NWLRUmegu v. Oko143

GUARANTEESHIP - Contract of guarantee - Nature of- Need for strict

compliance therewith.
 GUARANTEESHIP — "Guarantee" - Meaning and effect of.

WORDS AND PHRASES - "Guarantee " — Meaning and effect of.

Issue:
Whether or not the appellant entered into an agreement to guarantee
the payment of the debt owed by the 2nd defendant to the 1st
respondent.

Facts:
The 1st respondent herein by a writ of summons dated 18th March, 1998
commenced an action at the Ikom High Court, Cross River State against the
appellant, as 2nd defendant and the 1st respondent as the 1st defendant, claiming
the sum of ?200,000.00 (two hundred thousand naira), being the amount owed
the 1st respondent as money advanced for the supply of 40.32kg bags of cocoa,
and 35% interest per month on the said sum from November, 1997 until final
total payment is made.
The 1st respondent subsequently on 18th March, 1998 by a motion ex -
parte prayed the trial court for an order placing the suit under the undefended
list, and this was granted on 19th March, 1998.
The case of the 1st respondent was that sometime in November, 1996 the
appellant introduced the 2nd respondent to him as a proficient cocoa buyer.
Consequent upon the introduction, the respondent advanced the sum of ?
589,576.00 to the 2nd respondent for the supply of 120.34kg bags of cocoa at ?
4,900.00 per bag. The 2nd respondent supplied 80 bags leaving 40.32kg at ?
4,900 per bag totalling ?200,000.00. The 2nd respondent then absconded to
Cameroon without supplying the remaining quantity of cocoa nor refunded the
balance of the 1st respondent's money.
The 1st respondent stated further that he then approached the appellant who
thereafter communicated with the 2nd respondent. Later, the 2nd respondent
wrote to the respondent from Cameroon through the appellant asking for time to
enable him pay the said N200,000.00. Upon the failure of the 2nd respondent to
pay up, a complaint was made to the Chief Magistrate Court, Ikom which
compelled the 2nd respondent to enter into a bond as to when he
144Nigerian Weekly Law Reports3 December 2001

will make the money available, but the 2nd respondent absconded without paying
the said money.
The appellant, on the other hand, filed his notice of intention to defend himself
only on 29th May, 1998 together with an affidavit in which he deposed, inter
alia, that he did not introduce the 2nd respondent to the 1st respondent as a
proficient cocoa buyer; that the 1st respondent and the 2nd respondent were
operating individually as cocoa merchants and that the 2nd respondent neither
absconded to Cameroon nor did he communicate with him. He stated further that
the 2nd respondent owed the respondent ?110,000.00 and not ?200,000.00 as
alleged by the 1st respondent and that the 2nd respondent neither appeared at the
Chief Magistrate Court, Ikom nor undertook to pay ?200,000 to the 1st respondent.
It should be noted that the 2nd respondent did not take part at the trial, and
neither filed a notice of his intention to defend the suit nor a counter-affidavit
disclosing his defence on the merit even though there was an order of substituted
service of court processes on him.
When the case came up for mention, counsel for the parties raised the issue of
the validity of the notice of intention to defend filed by the appellant. The trial court
ruled that it regarded the affidavit and counter-affidavits filed by the parties as
pleadings and called on the parties to proceed to hearing by calling witnesses and
adjourned the case to 7th October, 1998 for hearing.
On that date, counsel for the appellant and the 1st respondent were in court but
neither the 2nd respondent nor his counsel was in court. On 18th November 1998,
the trial court entered judgment against the 2nd respondent in favour of the 1st
respondent and adjourned the case against the appellant to 11th January, 1999 for
hearing. On that date, neither the appellant nor his counsel was in court thus
prompting the 1st respondent to ask for judgment against him. So, on 13th January,
1999, the trial court entered judgment against the appellant in the sum of ?1l0,000
which sum he admitted the 2nd respondent owed the 1st respondent.
The appellant was aggrieved and he appealed to the Court of Appeal.

Held (Unanimously allowing the appeal):

1.On Meaning and effect of a guarantee -

[2001] 17 NWLRUmegu v. Oko145

A guaranty or guarantee is defined as a collateral agreement

for the performance of another's undertaking or an
agreement in which the guarantor agrees to satisfy the debt
of another (the debtor) only if and when the debtor fails to
repay. In other words, it is an undertaking or promise that is
collateral to the primary or principal obligation which binds
the guarantor to perform in the event of non-performance by
the principal obligor; the most obvious of which is the
contract of guarantee in which a person promises to repay a
debt to a lender of money, if the borrower fails to pay. (P.
155, paras. F-H)

2.On Meaning and effect of a guarantee -

 A guarantee is a written undertaking made by one person to
a second person to be responsible if a third person fails to
perform a certain duty, for example, pay a debt. In the
instant case, the respondent was unable to establish any
contract of guarantee between him and the appellant by
which the appellant undertook to pay the debt owed the
respondent by the 1st defendant. Thus, the respondent's case
is abysmally groundless to the extent that it disclosed no
reasonable cause of action against the appellant. [Royal
Exchange Assurance (Nig) Ltd. v. Aswani Textile Ind.
Ltd. (1992) 3 NWLR (Pt.227) 1; Hydro-Quest (Nig) Ltd. v.
B.O.N. Ltd (1994) 1 NWLR (Pt.318) 41 referred to and
applied; Ezomo v. A.G. Bendel State (1986) 4 NWLR (Pt.36)
448 distinguished] (Pp.157, paras.D-F; 158, paras. A,C).

3.On Ingredients of legally binding contract of guarantee -

The ingredients or common features of a contract of
guarantee are as follows:
(a)there must be three parties involved in the contract, viz:-
(i) a creditor, (ii) a principal debtor, (iii) a promissor
who undertakes to discharge the principal debtor's liability, should the
latter
146Nigerian Weekly Law Reports3 December 2001

fail to discharge it himself;

(b)there must be an agreement between the parties;
(c)the agreement must be in writing and if not under seal, there must be
valuable consideration;
(d)the contract or agreement must not be illegal as illegality generally renders
any contract null and void ab initio and the party seeking to enforce it will have
no remedy in a court of law.
In the instant case, a careful perusal of the facts of the case of
the respondent shows that there was no written agreement
between the parties evidencing any guarantee or promise or
undertaking by the appellant to satisfy or to be answerable for
the debt owed by the 1st defendant to the respondent, if the 1st
defendant refused to pay,(P. 156, paras.A-D)

4.On Need for contract of guarantee to be in writing -

A contract of guarantee, which term implies an undertaking,
must be in writing in order to be binding on the guarantor. If it
is not in writing, it is not a contract of guarantee stricto
sensu . Thus, in the instant case, the trial court erred when it
held that there was an undertaking by the appellant as the
 contract of guarantee could be by words or conduct. [Eboni
Finance & Securities Ltd. v. Woleojo Tech. Services Ltd. (1996)
7 NWLR (Pt.461) 464; Nigeria L.N. G. Ltd. v. African
Development Insurance Co. Ltd. (1995) 8 NWLR (Pt.416)
677 referred to.](P.157, paras.A- D)

5.On Whether admission of liability by principal debtor amounts to admission by

guarantor -
An admission of liability by a principal debtor is not necessarily
an admission by his guarantor. In the instant case, the fact that
the 1st defendant admitted liability in Exhibit "B" to pay the
debt cannot be construed to amount to admission of liability by
the
[2001] 17 NWLRUmegu v. Oko147

appellant who was not shown to have guaranteed the 1st

defendant's debt to the respondent. [National Bank of (Nig) Ltd
v. Guthrie (Nig) Ltd (1987) 3 NWLR (Pt. 56) 255 referred to.]
(Pp.l56-157, paras.H-A)

6.On Nature of and need for strict compliance with a contract of guarantee -
A contract of guarantee is a contract strictissimi juris and to
make the guarantor liable, the terms thereby must be strictly
complied with. [African Continental Bank Ltd v. Wogu (1965) 9
ENLR102 referred to.] (P. 155, para. H)

Nigerian Cases Referred to in the Judgment:

African Continental Bank Ltd v. Wogu (1965) 9 ENLR 102
Eboni Finance & Securities Ltd. v. Woleojo Tech. Services Ltd. (1996)
7 NWLR (Pt.461) 464
Ezomo v. A.G., Bendel State (1956) 4 NWLR (Pt.36) 448
First Bank (Nig.) Ltd. v. Pan Bisbilder Ltd (1990) 2 NWLR (Pt.134) 647
Hydro-Quest (Nig) Ltd. v. B.O.N. Ltd (1994) 1 NWLR (Pt.318) 41
National Bank of (Nig) Ltd v. Guthrie (Nig) Ltd (1987) 3 NWLR (Pt.56)
255
Nigeria L.N.G. Ltd. v. Afican Development Insurance Co. Ltd. (1995)
8 NWLR (Pt.416) 677
Obikoya v. Wema Bank Ltd (1991) 7 NWLR (Pt.201) 119
Royal Exchange Assurance (Nig) Ltd. v. Aswani Textile Ind. Ltd. (1992)
3 NWLR (Pt.227) 1
 Foreign Case Referred to in the Judgment:
Mount Stephen v. Lakeman (1874) L.R. 7H.L. 17

Books Referred to in the Judgment:

Black's Law Dictionary, 6th Ed. P. 705 Nigerian Law of Contract by Prof.
Sagay, P. 161 Osborn's Concise Law Dictionary, 6th Ed. P. 159

Appeal:
This was an appeal against the judgment of the High Court granting the 1st
respondent's claim. The Court of Appeal, in a unanimous decision, allowed the
appeal.
148Nigerian Weekly Law Reports3 December 2001(Ekpe, J.C.A. )

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History of the Case:

Court of Appeal:
Division of the Court of Appeal to which the appeal was
brought: Court of Appeal, Calabar
Names of Justices that sat on the appeal: Dennis Onyejife
Edozie, J.C.A.(Presided); Okwuchukwu Opene, J.C.A.;
Simeon Osuji Ekpe, J.C.A. (Read the Leading Judgment)
Appeal No.: CA/C/12/2000
Date of Judgment: Monday, 23rd April, 2001
Names of Counsel: Mathew Ojua —for the Appellant
No appearance for the Respondent

High Court:
Name of the High Court: High Court, of Cross River State Ikom.
Name of the Judge: Edem, J.
Suit No: HM/63/98
Date of Judgment: Wednesday 18th March, 1998

Counsel:
Mathew Ojua - for the Appellant
 No appearance for the Respondent

EKPE, J.C.A. (Delivering the Leading Judgment): By a writ of summons dated

18th March, 1998 and filed on the same date at the Ikom High Court of Cross River
State, the plaintiff in this suit No. HM/63/98 claimed against the defendants jointly
and severally the following reliefs:-
"(1)The sum of ?200,000.00 (two hundred thousand naira) being amount owed and
due (sic) the plaintiff by the defendants/respondents being money advanced for the
supply of 40.32 kg bags of cocoa.
2.35% interest per month on the N200,000.00 from November, 1997 until final total
payment is made by the defendants to plaintiff."
By motion ex-parte dated 18th March, 1998 and filed on the same
[2001] 17 NWLRUmegu v. Oko(Ekpe, J.C.A. )149

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date, the plaintiff prayed the court below for an order to place the suit under the
undefended list, and this was granted on the 19th of March, 1998. The facts of
the plaintiff's case may be gleaned from his affidavit in support of the motion ex
parte to place the suit under the undefended list which reads as follows:
"1.That I am the plaintiff/applicant in this matter as such very conversant with
the entire fact (sic) in issue.
(2)That the defendants/respondents are businessmen.
(3)That sometime in November, 1996 the 2nd defendant introduced the 1st
defendant to me as a proficient cocoa buyer.
(4)That based on that advice (sic), I advanced the sum of N589,576.00 (Five
hundred and eighty-nine thousand five hundred and seventy-six naira) to the 1st
defendant/respondent for the supply of 120.34 kg bags of cocoa at N4,900.00
(Four thousand, nine hundred naira) per bag. Receipt evidencing payment of the
said sum is hereby exhibited as Exhibit "A".
(5)That the 1st defendant supplied 80 bags leaving 40.32 kg at N4,900.00 per
bag totalling N200,000.00 (two hundred thousand naira).
(6)That, that quantity of cocoa had remained unsupplied till date nor has he
refunded the money.
(7)That after that period, the 1st defendant absconded to Cameroon. I then
approached the 2nd defendant who now communicated to the 1st defendant.
(8)That on the 9th day of May, 1997, the 1st defendant wrote to me from
Cameroon through the 2nd defendant asking for time to enable him pay the said
N200,000.00 (Two hundred thousand naira). The said letter is hereby exhibited
as Exhibit "B".
(9)That thereafter, the defendants went back to sleep. I have to lay a complaint
before the Chief Magistrate Court, Ikom. The Chief Magistrate then required the
 1st defendant to enter into bond as to when he will make the money available and
that he was to be taken on bail to secure his attendance in court. The 2nd
defendant appeared and took the 1st defendant on bail. The bail bond is hereby
exhibited as Exhibit "C".]
150Nigerian Weekly Law Reports3 December 2001(Ekpe, J.C.A. )

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(10)That the defendants flouted the order (s) of the chief magistrate, Ikom and
absconded. Till date they have refused, failed and or neglected to pay the said
N200,000.00 (two hundred thousand naira).
(11)That to the best of my knowledge and belief, the respondents have no defence
in this action whatsoever.
(12)That the writ of summons is hereto attached as Exhibit "D".
(13)That the claim against the defendants/respondents is as follows:
(14)Principal sum N200,000.00
(15)Interest of 35% per month from November, 1997 till judgment debt is finally
liquidated."
On being served with the relevant processes, the 2nd defendant on 29th May, 1998
filed notice of intention to defend the suit together with an affidavit disclosing his
defence to the suit. It is pertinent to reproduce in full the affidavit of the 2nd
defendant in order to appreciate the merit of his defence to the suit. The affidavit
reads;
"1.That I am the 2nd defendant/respondent in this suit and I am here to defend
myself only in this suit.
2.That I have been a cocoa merchant in Ikom since 1978 until date.
3.That plaintiff/applicant David Oko was receiving money from me and buying
cocoa for me from 1990 to 1994. The same goes for the 1st defendant Edward Utsu.
4.That plaintiff/applicant acquired cocoa business experience from me and from
1995 1st defendant began to receive money and buy cocoa from Osco Ltd. No. 65,
Obudu Road, Four Comers, Ikom. Plaintiff/applicant was also collecting money
from merchants whose names I do not know and buying cocoa for them.
5.That plaintiff/applicant and 1st defendant/respondent had been operating as such
individually up to December, 1995 on their own and I did not introduce 1st
[2001] 17 NWLRUmegu v. Oko(Ekpe, J.C.A. )151

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defendant/respondent to the plaintiff/applicant as a proficient
cocoa buyer.
6.That paragraph (sic) 1 and 2 of applicants (sic) affidavit are true while
paragraphs 3, 4, 5, 6 and 7 are not true in relation to me.
7.That plaintiff/applicant did not give 1st defendant/respondent any money to
buy cocoa for him at my instance, knowledge or consent.
8.That I was only called and know of a dispute between the plaintiff/applicant
when 1st defendant/respondent was detained in Ikom Police custody and he sent
some one whom I cannot now remember to invite me to come and take him on
bail and I did so in January, 1997.
9.That paragraph 7 of plaintiff/applicant's affidavit is vehemently denied as I did
not hear or know of 1st defendant/respondent ever escaping to the Cameroon and
plaintiff/applicant did not approach me and I did not communicate with the 1st
defendant on the issue.
10.That paragraph 8 of the plaintiff/applicant's affidavit is not true. 1st defendant
owed plaintiff only N110,000.00 (one hundred and ten thousand naira) and I do
not know what was said in the letter that 1st defendant wrote to the plaintiff
 except now that applicant served me with it as Exhibit B and no promise to pay
N200,000.00 is in that letter.
11.That sometime in about March, 1997 plaintiff wrote a petition to the C.I.D.
Calabar against the 1st defendant/respondent and the police transferred this case
from Ikom to Calabar police which gave me time and I went to the Cameroon
and looked for the 1st defendant/respondent in vain.
12.That paragraph 9 of the plaintiff's affidavit is partly true that plaintiff took the
matter to the Chief Magistrates Court Ikom, but it is partly untrue because I (2nd
defendant) did not take the 1st defendant/respondent on bail at that court but at
the Ikom police station as stated in Exhibit "C" of plaintiff's affidavit.
13.That at the Chief Magistrates court Ikom I was made to bring the parents of
1st defendant/respondent to that court
152Nigerian Weekly Law Reports3 December 2001(Ekpe, J.C.A. )

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and they were given two weeks to look for and produce their
son to the court but they also failed to do so at the stipulated
time until date.
14.That paragraphs 10,11,12,13(a) & (b) and 14 of plaintiff/applicant's affidavit are
denied. 1st defendant/ respondent never appeared at the Chief Magistrates Court
and we did not undertake to pay N200,000.00 to the plaintiff.
15.That I am not a party to any cocoa business done between the plaintiff/applicant
and the 1st defendant/re- spondent at all.
16.That my only stake in the conflict is that I had taken the 1st
defendant/respondent on bail from the Ikom Police simplicita (sic)
17.That I am not indebted in any amount or form to the plaintiff/applicant.
18.That in view of the above premises I have a defence on the merits to the
plaintiff/applicant's instant suit.
19.That plaintiff/applicant's suit is brought against me in bad faith and dishonestly."
It is remarkable that the 1st defendant did not file any notice of intention to defend
the suit neither did he file any affidavit disclosing his defence on the merits. He did
not appear at the trial and was not represented by counsel even though there was an
order of substituted service of the processes of the court on him. On the 9th of June,
1998, when the case came up for mention, the main issue that was raised in the
court by the counsel for the parties was whether the notice of intention to defend
filed by the 2nd defendant was in order. In his ruling on 21st July 1998, the learned
trial Judge at page 21 of the record of proceedings opined thus:
"It only admits of judgment where there is no notice of intention
to defend with the accompanying affidavit disclosing a defence on
the merit. But if there is such a defence then the court may hear
the parties based on their affidavit evidence or proceed to
pleadings after transferring the suit to the general cause list.... I
therefore regard the two affidavits (i.e. the plaintiff's affidavit for
placing the suit on the undefended list and the 2nd defendant's
 affidavit disclosing his intention to defend) as pleadings and call
on the parties to either
[2001] 17 NWLRUmegu v. Oko(Ekpe, J.C.A. )153

H
 proceed to hearing by calling witnesses as evidence." Both counsel
for the parties were present at 1st ruling. The learned counsel for the plaintiff
opted to call evidence on the affidavits and the learned counsel for the defendant
had no objection. Then, the learned trial Judge adjourned the case to 7th October
1998 for hearing. On that date, both counsel for the plaintiff and the 2nd
defendant were in court but neither the 1st defendant nor his counsel was present
for the hearing. The learned counsel for the plaintiff applied for judgment against
the 1st defendant who did not file any notice of intention to defend the suit. On
18th November 1998, the trial Judge, Edem, J. entered judgment against the 1st
defendant in favour of the plaintiff in accordance with the writ of summons and
adjourned the case against the 2nd defendant to 11th January 1999 for hearing.
On that date both the 2nd defendant and his counsel were not present in the court
for the hearing and counsel for the plaintiff asked for judgment against the 2nd
defendant. So, on the 13th of January 1999 the learned trial Judge Edem J, in his
ruling entered judgment against the 2nd defendant in favour of the plaintiff in the
sum of N110,000.00, which sum the learned trial Judge stated that the 2nd
defendant claimed to know as the 1st defendant's indebtedness to the plaintiff
and not N200,000.00 as claimed by the plaintiff. The learned trial Judge in the
said ruling at page 26 of the records held the view that from the 2nd defendant's
affidavit evidence, the 2nd defendant entered into an undertaking for the 1st
defendant and he could not escape the consequences of the menacing pangs of
the undertaking. The 2nd defendant now appellant being dissatisfied with the
judgment in favour of the plaintiff now respondent delivered by Edem, J. has
appealed to this court against the said judgment on a notice of appeal containing
only one ground of appeal on error in law namely:
"The learned trial Judge erred in law in holding that the 2nd
defendant was a surety/guarantor to the 1st defendant in the
transaction between the plaintiff and the 1st defendant.
Particulars of Error
(i)There was no iota of evidence that the 2nd defendant guaranteed the
transaction in question.
(ii)The fact of guarantee of a transaction must be express and not by
implication."
The appellant later brought an application for an order dispensing with the
compilation of the record of appeal by the Registrar of the
154Nigerian Weekly Law Reports3 December 2001(Ekpe, J.C.A. )

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court below for the hearing of the appeal on the bundle of documents exhibited to
the affidavit in support thereof and marked exhibit "MMI", and this was granted by
this court. Thereafter, the appellant filed his brief of argument in which he raised
one issue for the determination of the appeal. The issue reads:
"Whether the 2nd defendant guaranteed the transaction between
the plaintiff and the 1st defendant as to make him liable."
 When the respondent did not file the respondent's brief of argument after the
expiration of the time allowed by the Court of Appeal Rules, the appellant by a
motion on notice applied that the appeal be heard on the appellant's brief alone and
this was granted.
In the appellant's sole issue in his brief for the determination of the appeal it
was submitted that the appellant did not guarantee the transaction between the
respondent and the 1st defendant and he was therefore not liable to the claim of the
respondent. The appellant referred to the affidavit of the respondent and contended
that there is nothing in the said affidavit and the exhibits annexed thereto that
equates to a guarantee by him of the transaction between the respondent and the 1st
defendant. He referred to Exhibits "A" and "B" and submitted that there is nothing
in them to show any undertaking or guarantee by him (the appellant) and that rather
Exhibit B clearly exonerated him from any liability whatsoever. It was further
submitted that assuming without conceding that the appellant introduced the 1st
defendant to the respondent as a proficient cocoa buyer as deposed to by the
respondent in his affidavit, that alone was not enough to constitute the appellant as
a guarantor and to imply an undertaking for him to repay the money loaned to the
1st defendant by the respondent in the event of any default to pay by the 1st
defendant. The appellant's affidavit in support of his notice of intention to defend
was referred to and it was submitted that on the face of the affidavits of the parties,
the learned trial Judge was in error to hold that an undertaking by way of a
guarantee by the appellant was present in the transaction between the respondent
and the 1st defendant and that a guarantee cannot be by words or conduct. Alluding
to the cases of Eboni Finance & Securities Ltd. v. Woleojo Technical Services
Ltd (1996) 7 NWLR (Pt.461) 464 at page 476 and Nigeria L.N.G. Ltd. v. African
Development Insurance Co. Ltd. (1995) 8 NWLR (Pt.416) 677 at 694, it was
submitted that for a contract of guarantee to be binding there must be an agreement
[2001] 17 NWLRUmegu v. Oko(Ekpe, J.C.A. )155

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between the parties and the agreement must be in writing and if not under seal,
there must be valuable consideration. The definition of a contract of guarantee
was referred to in Royal Exchange Assurance (Nig) Ltd v. Aswani Textile
Industries Ltd. (1992) 3 NWLR (Pt.227) 1 at page 13 per Akpata JSC. See
also Hydro-Quest (Nig) Ltd v. B.O.N. Ltd. (1994) 1 NWLR (Pt.318) 41 at
53; Obikoya v. Wema Bank Ltd (1991) 7 NWLR (Pt.201) 119 at 128; First Bank
(Nig.) Ltd. v. Pan Bisbilder Ltd (1990) 2 NWLR (Pt.134) 647 at page 656. On
the holding by the learned trial Judge that the appellant should pay the
respondent the sum of N110,000.00 which the court stated the appellant claimed
to know as the 1st defendant's indebtedness to the respondent it was contended
by the appellant that in the absence of a binding contract of guarantee, the
appellant cannot be held liable for merely having knowledge of the sum owed the
respondent by the 1st defendant. It was submitted that people do not become
liable for debts of third parties for merely knowing what they owe, as the
consequences would be monstrous and preposterous were it to be otherwise.
At the hearing of the appeal, the appellant's counsel adopted the appellant's
brief of argument and urged this court to allow the appeal. As I have earlier
stated, the respondent did not file any brief.
The merit or otherwise of this appeal turns on the narrow issue as to
whether or not the appellant entered into an agreement to guarantee the payment
of the debt owed by the 1st defendant to the respondent. According to Black's
Law Dictionary, 6th Edition page 705, a guaranty or guarantee is defined as a
collateral agreement for performance of another's undertaking or an agreement in
 which the guarantor agrees to satisfy the debt of another (the debtor) only if and
when the debtor fails to repay. In other words, it is an undertaking or promise
that is collateral to the primary or principal obligation which binds the guarantor
to perform in the event of non-performance by the principal obligator. The most
obvious illustration of this type of situation is the contract of guarantee in which
a person promises to repay a debt to a lender of money, if the borrower fails to
pay. See Nigerian Law of Contract by Professor Sagay at page 161; Osborn's
Concise Law Dictionary, 6th Edition page 159. A contract of guarantee is a
contract strictissimi juris and to make the guarantor liable the terms thereby must
be strictly complied with. See African Continental Bank Ltd v. Wogu (1965) 9
E.N.L.R. 102.
156Nigerian Weekly Law Reports3 December 2001(Ekpe, J.C.A. )

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The common features of a contract of guarantee may be stated as follows:

(1)There must be three parties involved in the contract - i.e. (a) a creditor, (b) a
principal debtor, (c) a promissor who undertakes to discharge the principal debtor's
liability, should the latter fail to discharge it himself.
(2)There must be an agreement between the parties.
(3)The agreement must be in writing and if not under seal, there must be valuable
consideration.
(4)The contract or agreement must not be illegal as illegality generally renders any
contract null and void ab initio and the party seeking to enforce it will have no
remedy in a court of law.
A careful perusal of the facts of the case of the respondent shows that there is no
written agreement between the parties evidencing any guarantee or promise or
undertaking by appellant to satisfy or to be answerable for the debt owed by the 1st
defendant to the respondent, if the 1st defendant refused to pay. Exhibit "A" which
is annexed to the affidavit of the respondent is evidence of the receipt of the total
sum of N589,576.00 by the 1st defendant from the respondent. The appellant was
not mentioned therein. Exhibit "B" also annexed to the respondent's affidavit is a
letter from the 1st defendant dated 9th May, 1997 to the respondent accepting
liability to pay the debt while promising and re-assuring the respondent that he
would pay the debt and urging the respondent to exercise patience. In the
concluding portion of Exhibit B, the 1st defendant wrote:
"Please I don't want you to have any problem with Cocoa Master
(i.e. the appellant). At least you know that whenever we have a
problem he does not have to look at us like others without settling
us, so he has done the right thing by trying to settle us."
Undoubtedly, from Exhibit "B" produced by the respondent, the appellant is
exculpated from any liability to pay the debt of the 1st defendant. The law is that an
admission of liability by a principal debtor is not necessarily an admission of
liability by his guarantor. See National Bank of (Nig) Ltd v. Guthrie (Nig) Ltd &
anor (1987) 2 NWLR (Pt.56) 255. In the instant case, the fact that the 1st defendant
admitted liability in Exhibit "B" to pay the debt cannot be construed to amount to
admission of liability by the appellant who has
[2001] 17 NWLRUmegu v. Oko(Ekpe, J.C.A. )157

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 not even been shown to have guaranteed the 1st defendant's debt to the
respondent.
The learned trial Judge in his judgment held the view that there was an
undertaking by the appellant as the contract of guarantee could be by words or by
conduct. With due respect I disagree with him. In my view, the learned trial
Judge misconceived the meaning and the legal implication of a contract of
guarantee. It is elementary but a fundamental principle of law that a contract of
guarantee which the term implies an undertaking must be in writing in order to
be binding on the guarantor. If it is not in writing, it is not a contract of
guarantee strictu sensu. See Mowitstephen v. Lakeman (1874) L.R.7H.L.
17; Eboni Finance & Securities Ltd. v. Woleojo Tech. Services Ltd. (1996)
7 NWLR (Pt.461) at page 476; Nigeria L.N.G. Ltd. v. African Development
Insurance Co. Ltd. (1995) 8 NWLR (Pt.416) 677 at 694. In Royal Exchange
Assurance (Nig) Ltd. v. Aswani Textile hid. Ltd. (1992) 3 NWLR (Pt.227) 1 at
page 13 , Akpata, J.S.C. said of a contract of guarantee thus:
"A guarantee is a written undertaking made by one person to a
second person to be responsible if a third person fails to
perform a certain duty e.g. pay a debt."
See also Hydro-Quest (Nig) Ltd. v. B.O.N. Ltd (1994) 1 NWLR (Pt.318) 41 at
page 53. The case of Ezomo v. A.G. Bendel State (1986) 4 NWLR (Pt.36)
448 cited by the trial Judge does not apply here.
In the circumstances, I therefore hold that the respondent was unable to
establish any contract of guarantee between him and the appellant by which the
appellant undertook to pay the debt owed the respondent by the 1st defendant. I
therefore hold that this appeal is meritorious and it ought to be allowed. I
therefore hereby allow the appeal. The judgment of the lower court delivered in
this suit No. HM/63/98 is hereby set aside. The suit is dismissed as it concerns
the appellant. I award the sum of N5,000.00 costs to the appellant.

EDOZIE, J.C.A.: I had read before now the leading judgment just delivered by
my learned brother Ekpe J.C. A. The issue raised in the appeal falls within a very
narrow compass and as rightly identified in the leading judgment it is whether
the appellant had guaranteed to pay to the respondent the debt owed to the latter
by the 1st defend-
158Nigerian Weekly Law Reports3 December 2001(Opene, J.C.A. )

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B

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ant. No evidence of such a guarantee was disclosed in the respondent's affidavit.
The respondent's case is abysmally groundless to the extent, I dare say, it disclosed
no reasonable cause of action against the appellant.
I agree entirely that the appeal be and is allowed by me. I abide by the
consequential orders made in the lead judgment.

OPENE, J.C.A.: I have read in advance the judgment delivered by my learned

brother Ekpe JCA. I entirely agree with him that the respondent had completely
failed to establish any contract of guarantee between him and the appellant by
which the appellant underlook to pay the debt owed the respondent by the 1st
defendant.
In the result, I am also of the view that the appeal is meritorious and that it
ought to be allowed. I therefore allow the appeal.
I abide by the consequential order made in the leading judgment including the
order as to costs.

Appeal allowed