Guarantees and indemnities in Uganda
In brief
A contract of guarantee is a promise to perform or discharge the liability of a third person (the principal debtor) if they default (Contracts Act, Cap. 284, s.67). It must be in writing (s.9(6)). A guarantor's liability is co-extensive with the principal debtor's, but the guarantor has protections: they are discharged by a variance in the underlying contract made without their consent (s.73), by the release or discharge of the principal debtor (s.74), and where the creditor compromises with, gives time to, or agrees not to sue the principal debtor (s.75).
1. Governing law
Under the Contracts Act, Cap. 284, a 'contract of guarantee' is a contract to perform a promise or discharge the liability of a third person in case of the third person's default; the person who gives the guarantee is the guarantor (surety), the person for whom it is given is the principal debtor, and the person to whom it is given is the creditor (s.67); a 'continuing guarantee' extends to a series of transactions. A contract of guarantee or indemnity must be in writing (s.9(6)). Anything done, or any promise made, for the benefit of the principal debtor may be sufficient consideration for the guarantee (s.69). The guarantor's liability is, in general, co-extensive with that of the principal debtor (s.70), but the Act gives the guarantor important discharges: a variance in the terms of the contract between the principal debtor and the creditor without the guarantor's consent discharges the guarantor as to subsequent transactions (s.73); the guarantor is discharged by any contract releasing or discharging the principal debtor (s.74); and the guarantor is discharged where the creditor compromises with, gives time to, or agrees not to sue the principal debtor (s.75). An indemnity (a promise to make good a loss) differs from a guarantee but must likewise be in writing (s.9(6)). Statutory text verified against the consolidated Laws of Uganda as at 31 December 2023. Sourced from the Uganda Legal Information Institute (ulii.org).
2. Key statutes & rules
- Contracts Act, Cap. 284 — s.67 (definitions: contract of guarantee, continuing guarantee, creditor, principal debtor, guarantor); s.9(6) (a contract of guarantee or indemnity must be in writing); s.69 (consideration for a guarantee); s.70 (liability of guarantor); s.73 (discharge by variance without consent); s.74 (discharge by release/discharge of the principal debtor); s.75 (discharge where the creditor compromises, gives time, or agrees not to sue).
3. Practical guidance
Put any guarantee or indemnity in writing — it is unenforceable otherwise (s.9(6)).
As a guarantor, understand your liability is generally co-extensive with the debtor's (s.70) — read the principal contract, not just the guarantee.
Insist on being consulted on any variation: a change to the main contract without your consent discharges you as to later transactions (s.73).
Watch for discharge events: release of the principal debtor (s.74), or the creditor giving time, compromising or agreeing not to sue (s.75) can discharge you.
Creditors: do not vary the deal, release the debtor, or give time without the guarantor's consent if you want to preserve the guarantee.
This note is a practitioner orientation, not legal advice, and does not create an advocate–client relationship. Ugandan law changes and chapter and section numbers were revised in the 2023 Laws of Uganda. Verify every statute, rule and authority against the current primary source — and the specific facts of your matter — before filing or relying on it.