One factor that lubricates the will of economic growth of any nation is availability of funds for various business transactions be it at individual or corporate level. It serves as the spinal cord as well as the livewire of the business in any society.
Unfortunately, not all business organizers are clothed with adequate financial muscle with which to keep the ship of transactions always as a going concern. Consequently, resort has to inevitably be made to seeking access to financial aids in form of credit facilities from persons or organizations capable of extending such facilities e.g Banks.
Universally, one of the conditions for accessing credit facilities like loans is a contract between the creditor and the debtor with a requirement of a guarantor or surety as a safeguard that the debtor shall repay the credit advanced to him by the creditor.
Whether in large commercial transactions involving banks or individual advancement of credit facilities, sureties or guarantors are almost inevitable as they serve as witnesses and more importantly as vital factors to ensure that parties keep to the agreement.
Although only parties to a contract are bound by the contract and no stranger can take benefit or be bound by the terms, a contract of guarantee binds the guarantor the moment he accepts and acts as one.
The reason for this is crystal clear. The creditor needs assurance for the repayment of the money so that the business will not grind to a halt.
There is no doubt that some debtors are crafty, inconsiderate and more often than not unwilling to pay back the facilities extended to them. They subsequently put the creditor in a very difficult position that has the capacity and in many cases can actually write finis to the business.
Besides, some honest debtors may run into crisis, misfortune or indeed become bankrupt rendering them incapable of fulfilling their obligation to the creditor.
In any of the above circumstances, the creditor is not expected to just suffer and forget his hard earned income or fold up as such pain will too much and unjustifiable for him to bear.
The law envisages such a situation and accordingly provides within reasonable limits remedy for it. This remedy finds eloquent expression in the guarantor stepping into the shoes of the debtor should the debt fail to pay.
The guarantor technically is therefore a debtor and it only takes the failure of the principal debtor for the indebtedness of the guarantor to crystalize.
It is trite law that once a person personally agrees to be responsible for the liability of a third party by entering a contract of guarantee or suretyship, a distinct contract then evolves between the creditor and the guarantor.
This has been adumbrated by the courts in a plethora of cases. see Chami v UBA (2010) 6NWLR (Pt.1191) pg. at 501 para B-C per Onoghen JSC. Ekerebe v Efeizomor II (1993) 7NWLR (Pt307)588 at 601.
When therefore the debt runs away or fails to pay the guarantor or surety should be prepared to be held fully responsible. Chami v UBA (supra).
The creditor can even proceed against the surety independently of the principal debtor as the contact of guarantee can be enforced against the guarantor either directly or indirectly.
It is enough that the surety or guarantor is liable to the extent of the import of the written contents of the contract of guarantee. See Chami v UBA (supra)
Unfortunately, many creditors have bee3n unable to recover their facilities because either the debtor has sneaked out of town or has bluntly refused to pay. Others resort to self-help by engaging the services of police or other security or para military personal to recover their money.
This is wrong as the police or other security operatives have no power under the law to act as debt collectors or recover debts for anybody. The proper step to take in such circumstance is to proceed against the surety in a court of competent jurisdiction.
This can be achieved by the creditor consulting his lawyer who will take the appropriate step to recover the money. This is decent, lawful and in line with global best practices.
Such civilized and clean approach will ensure that unconscionable debtors do not put creditors out of circulation. It also reduces if not obliterate the lawlessness and culture of impunity associated with self- help in seeking remedy by aggrieved creditors.
Since a surety is technically a debtor, people should be circumspect in standing as guarantor to unreliable persons or persons of uncertain means or characters that will be incapable of performing the contract.
Indeed, there is wisdom that business thrive when customers pay their debts as at when due and the society will be better for it. Infact the caveat is let the surety beware.
