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Court restores banks’ right to pursue loan guarantors
The ruling clarifies an important aspect of commercial lending by affirming that courts must enforce guarantee agreements according to their terms where the parties expressly contemplated future restructuring of credit facilities.
The Court of Appeal has restored authority to banks to enforce guarantees after restructuring defaulted loans, ruling that guarantors remain bound where they expressly agreed that lenders could vary or reorganise credit facilities without seeking fresh consent.
In a judgment delivered in Eldoret, the appellate court overturned a High Court decision that had freed businessman Chepkonga Chebon from liability under a guarantee securing loans advanced by Consolidated Bank of Kenya to Lomsons Enterprises Ltd.
