Discharge by variation of loan

Triodos Bank NV v Dobbs (No 2) CA TLR 30 May

The defendant had guaranteed the repayment of a loan to his company by the claimant. The Court of Appeal upheld his contention that a subsequent material variation of the original loan agreement constituted a replacement of that agreement with the result that the defendant was no longer liable under his guarantee of the old agreement. An agreement which truly replaced the original loan agreement could not rightly be called an amendment or variation to the original agreement since it was a new agreement. That was particularly true in the context of a guarantee which obliged the guarantor to pay sums falling due under an earlier agreement. Once that loan agreement had been replaced by a second and different agreement, sums due under that new and different agreement could not be sums due under the earlier agreement.