The Dos and Donts of Personal Gaurentees

Published: 14th May 2012
Views: N/A

The Dos and Donts of Personal Gaurentees


As forms of corporate business setups evolve, so does the spectrum of related business dealings, corporate processes and issues. All business scenarios require legal attention followed by documented evidence that is in the form of a written contract or an agreement. Every procedure in a business setup is closely coupled with legal requirements that each business entity or individual has to comply with. Failing to comply with any legal requirement (in the light of the established circumstances) naturally results in the birth of a variety of lawful objections. One such legal requirement is that of a ‘Personal Guarantee Contract’.

Legal Significance

Personal Guarantee is a contract whereby a Guarantor (first party) agrees to be liable for their own or the Borrower’s (second party) obligations or debts, in the best interest of the Lender (third party). In Scotland, this type of agreement is regulated under the Consumer Credit Act 1974 (now amended to the CCA Act 2006). The CCA Act offers protection to all the involved entities, in a set of given circumstances, so to better secure their business and financial stance.

A guarantee pact can also have more than one Guarantors. The provision of a guarantee agreement is very common nowadays. It is considered important because it is regarded as a safety measure for securing the investor’s (or the creditor’s) assets and protecting a Guarantor’s legal bearing in troublesome situations.

The Challenge

All the conditions set forth in a guarantee are enforceable in the case of default or similar situations where the Borrower fails to fulfill legal duties as earlier established in the contract. The Guarantor then provides the guarantee of payment on behalf of the Borrower to the Lender. The enforcement of a guarantee agreement often exposes each of the involved parties to serious threats and liabilities which lead to loss of financial assets. The most common dispute arises when a Lender seeks to enforce the guarantee and the Guarantor attempts to avoid liabilities. Such disputes and risks require legal settlements that are normally pursued by solicitors. A guarantee pact should therefore be finalized while keeping all the legal implications and considerations in mind. Also, the Guarantor should be completely aware of their legal standing and aptitude in an event of failure.

Why do I need this?

The personal guarantee contract documented by Net Lawman incorporates all the requisite details that the Guarantor and the Lender might seek before entering into a guarantee pact. This document can also be used as a framework when a regular contract does not cater any type of individual guarantee but an involved party still requires it.


Contents of this document

This guarantee contract mainly includes details related to the following:

  • Provision for one or more Guarantors to join the contact

  • Verification on behalf of the Guarantors on all aspects of the agreement

  • Preference to limit the guarantee if required or needed

Applications and Features of this document

The nature of this guarantee contract establishes and outlines the following values for greater flexibility and relevance:

  • Guarantor may be a business or an individual

  • Appropriate for any type of contract

  • Written in plain English for accurate interpretation and communication

About Net Lawman

Net Lawman Ltd, established in 2000, is an English company and is the premier supplier of comprehensive legal documents and legal forms. Delivering quality and cost effective legal products is the core philosophy at Net Lawman. The company offers a range of specialized services including legal advisory and bespoke drafting services. Net Lawman has strong field expertise and a dedicated team of lawyers. The company has presence in United Kingdom, Scotland, Ireland (Republic), Australia, New Zealand, South Africa and India.

Report this article Ask About This Article

More to Explore