Contracts Act · s 96

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s 96Guarantee obtained by concealment invalid

Any guarantee which the creditor has obtained by means of keeping silence as to material circumstances is invalid.

Illustrations

(a)

A engages B as clerk to collect money for him. B fails to account for some of his receipts and A in consequence calls upon him to furnish security for his duly accounting.

C gives his guarantee for B’s duly accounting. A does not acquaint C with B’s previous conduct. B afterwards makes default. The guarantee is invalid.

(b)

A guarantees to C payment for iron to be supplied by him to B to the amount of 2,000 tons. B and C have privately agreed that B should pay $5 per ton beyond the market price, such excess to be applied in liquidation of an old debt. The agreement is concealed from A. A is not liable as a surety.