Zimbabwe Development Bank v General Accident Insurance Company

On 14 February 1992, the plaintiff bank (Zimbabwe Development Bank) entered into a loan agreement with African Savanna Touring (Pvt) Ltd for £102,063.00. On 27 August 1992, the defendant (General Accident Insurance Company) guaranteed African Savanna's indebtedness up to Z$600,000.00. African Savanna breached the loan agreement, and the plaintiff obtained judgment against it for Z$2,300,743.90, which remained unsatisfied. On 21 June 1994, the defendant gave notice terminating the guarantee effective 21 July 1994. On 11 October 1994, insurance agents representing African Savanna requested a copy of the guarantee, and on 20 October 1994, the plaintiff forwarded a copy while retaining the original. The plaintiff then sued the defendant to enforce the guarantee.

• Whether the defendant was entitled at law to terminate the guarantee on notice
• Whether the plaintiff accepted the termination of the guarantee
• Whether the plaintiff's claim had prescribed

Judgment was granted in favour of the defendant with costs. The plaintiff's claim to enforce the guarantee was dismissed.

A guarantee relating to a single transaction cannot be lawfully terminated by the guarantor upon notice. However, where a creditor's conduct demonstrates acceptance of a purported termination of such a guarantee—including failure to challenge the termination and returning the guarantee document when requested—the creditor will be held to have waived its legal rights to enforce the guarantee. A guarantee for an indefinite period that endures for as long as the debt remains outstanding is not subject to prescription.

The court noted that the matter proceeded on the merits despite the plaintiff bank being in default at the hearing. The defendant was granted leave to argue the matter, indicating the court's willingness to dispose of matters efficiently even where one party fails to appear. The court also observed that the plaintiff was advised of the cancellation both directly (through receipt of the termination letter) and indirectly (through insurance agents), strengthening the inference of acceptance.

This case demonstrates an important principle in the law of suretyship that while a guarantor cannot unilaterally terminate a guarantee relating to a single transaction as a matter of law, a creditor may nonetheless lose the right to enforce such a guarantee if their conduct demonstrates acceptance of the purported termination. The case illustrates how the doctrine of waiver can operate to extinguish legal rights even where those rights would otherwise be enforceable. It also clarifies that guarantees for indefinite periods (tied to the duration of indebtedness) do not prescribe.