Under the common law case James Graham & Co (Timber) Ltd v Southgate-Sands in Court of Appeal (Civil Division), 1985 (still good law – decision not been overturned to date), it was found that there is no contract of guarantee unless all the anticipated parties to the contract in fact became bound.
Facts were: G supplied timber to a company of which S was a director. When the company could not pay for it, G agreed to suspend the claim for a year if the company’s debt was jointly and severally guaranteed by the three directors. A signed guarantee was provided and the company subsequently went into liquidation. G issued a writ against the three directors but before trial it was discovered that one of the signatures was a forgery. S contended that he was not bound by the guarantee. The county court judge found for G.
It was held that, a joint guarantor under a guarantee which showed on its face that the other joint guarantors were intended to be parties was not liable at law if the signature of one of the other joint guarantors was forged since there was no contract of guarantee unless all the anticipated parties to the contract in fact became bound.
Where there exists a number of guarantors and the term ‘joint and several’ does not exist, there is still a chance that Guarantors may still be discharged in equity.