No liability for Guarantor example

Guarantor No Liability:

. A case example of this is the National bank v Murland, in this situation the lender had taken precautions of having securities for the loan other than the guarantee. The debtor asked for one of the securities to be released to him and the bank agreed. The guarantor was not happy as this increased the amount that he may be liable for – e.g. if the securities were valued at $20,000 and the loan was for $30,000 then with all the securities the potential liability of the   guarantor would only be $10,000. If a security is released and its value was $4000 then this would increase the potential liability of the guarantor to $14,000. The guarantor took the matter to court and it was decided that since the guarantor had not consented to this he was entitled to be released from the guarantee to the value of the security that was released – e.g the amount of the extra liability that occurred as a result of the action by the bank.