Simon's Legal Resources

Contract - Guarantee - Nature

. Bank of Montreal v. Javed

In Bank of Montreal v. Javed (Ont CA, 2016) the Court of Appeal noted a guarantee's essential nature as a contract:

[20] A guarantee is a contract, and the ordinary principles of contract law apply to a creditor’s breach. Consequently, only the most serious misconduct on the part of the creditor will discharge a guarantee. Some examples from the cases include: a creditor acting in bad faith toward the surety; the creditor concealing material information at the inception of the guarantee; where the creditor causes or connives the default of the principal debtor; or where there is a variation in the terms of the contract between the creditor and the principal debtor of a type that would prejudice the interests of the surety: Bank of India v. Trans Continental Commodity Merchants Ltd. & Patel, [1982] 1 Lloyd's Rep. 506 (Q.B. Com. Ct.), at p. 515, aff'd [1983] 2 Lloyd's Rep. 298 (C.A.) at p. 302; Bank of Montreal v. Wilder, 1986 CanLII 3 (SCC), [1986] 2 S.C.R. 551; Pax Management Ltd. v. Canadian Imperial Bank of Commerce, 1992 CanLII 27 (SCC), [1992] 2 S.C.R. 998; Manulife Bank of Canada v. Conlin, 1996 CanLII 182 (SCC), [1996] 3 S.C.R. 415.