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Challenging Personal GuaranteesApril 24, 2012
Be very careful when giving a personal guarantee ensuring you know what you are agreeing to and the extent of your obligations. If you receive a demand on your guarantee take advice.
- A guarantee must be in writing and signed by the guarantor or agent if authorised.
- The bank or finance company must be a party although do not have to be a signatory.
- Mostly a guarantor will only be liable once the debtor is in default.
- The guarantor will only be liable to the extent the company is liable.
- The court are willing if there are ambiguities in the agreement to find against the bank.
- Liability will exist when the company is in default and you have been served with a demand
Challenging Personal Guarantees.
- If there are material alterations in the guarantee after signature then they are void.
- Any alteration prejudicial to the guarantor renders the document unenforceable.
- Revocation. You will have to check the terms to see how this is done.
- Misrepresentation. If the bank or the bank and company has induced you to enter into the guarantee by a misrepresentation then the contract will be unenforceable.
- Non disclosure. Any unusual features must be brought to the guarantors attention.
- Undue influence. The individual circumstance of the guarantor and his position in the company will have to be examined.
What are your rights?
- An indemnity against the company if it is still trading or against other joint guarantors
- A right of subrogation against the bank, ie assuming the rights the bank had.
- A guarantor is able to take advantage of any defence the company had against the bank.
- It is important that you take professional advice on the guarantee.
- If advice is given by the bank or a broker then ensure you keep a note of the advice or confirm the advice in writing.
- Ensure if you give a guarantee that you have influence in the companies affairs
For advice on a personal guarantee call Carruthers law today or fill in one of our enquiry forms.