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Brown‑Forman v Bacardi: guarantees and indemnities, Holme v Brunskill variation and consent, and equitable set‑off—Commercial Court guidance under English law

Published on: 03 June 2021

Published by a LexisNexis Commercial expert
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Brown-Forman Beverages Europe Ltd v Bacardi UK Ltd [2021] EWHC 1259 (Comm) (19 May 2021) What are the practical implications of this case?

The rule from Holme v Brunskill (1877) 3 QBD 495 provides that any material change to the contractual terms between the creditor and the principal debtor releases a guarantor. If a variation has been made, the creditor must demonstrate that the change can only operate to the surety’s advantage, or that by its very character it can never in any situation increase the surety’s exposure. Parties may exclude this rule by agreement, and prudent creditors routinely do so. It has been labelled a snare for the careless creditor. This judgment confirms two significant practical propositions concerning the rule and points to a specific hazard. First, the court reiterates that the rule is confined to guarantees and does not extend to contracts of indemnity. That offers yet another reason why those preparing instruments of suretyship should frame them as indemnities as well as guarantees. Secondly, it clarifies the test for whether a variation can only benefit the surety, and centres on whether any change might, in any scenario, increase the surety’s risk under the guarantee at all whatsoever...

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