Valassis v McCabe

In *Valassis v McCabe*, the New South Wales Court of Appeal considered a dispute between the parties concerning the enforceability of a guarantee.

The central legal issue before the Court was whether the respondent, Mr. McCabe, was bound by a guarantee he had provided in favour of the appellant, Valassis, in circumstances where the primary debt had been discharged by a settlement with a third party. Specifically, the Court had to determine if the guarantee was extinguished by the settlement, or if it remained enforceable against Mr. McCabe.

The Court of Appeal held that the guarantee was not discharged by the settlement. Applying established principles of contract law, particularly concerning guarantees, the Court reasoned that the settlement with the third party did not operate to release Mr. McCabe from his obligations under the guarantee. The terms of the guarantee were such that it remained operative even if the principal debtor's liability was extinguished through a settlement with another party. The Court emphasised that the guarantee was a separate and independent obligation.

The Court of Appeal accordingly allowed the appeal and ordered that judgment be entered for the appellant, Valassis, against the respondent, McCabe, in the sum of $10,000 together with interest and costs.