The defendant guaranteed payment of the price of equipment sold by the claimant to the defendant’s subsidiary. The claimant then entered into agreements with the subsidiary and various finance companies under which title in certain of the goods passed to the finance companies in return for payment of part of the relevant purchase price. The subsidiary paid some of the purchase price of the goods, as did the finance companies but the balance remained unpaid when the subsidiary went into liquidation. The claimant claimed on the guarantee and issued proceedings. The defendant argued that the original contract for sale had been discharged and its guarantee did not extend to its subsidiary’s obligations to the claimant under the new contractual arrangements with the finance companies.
The Court of Appeal held that the new arrangements did not discharge and replace the subsidiary’s original obligations. The subsidiary’s original obligation to pay for the goods was discharged only to the extent that the claimant obtained the right to obtain payment from the finance companies but remained in place to the extent that it did not. The subsidiary’s obligation to pay had simply been reduced not discharged.
Wittmann (UK) Ltd v Willdav Engineering SA