You may have been asked to sign a document as Guarantor. Providing a personal guarantee and becoming a guarantor can take place in response to a variety of circumstances including entering into a commercial lease, on behalf of your spouse or partner if they are borrowing money, or if your child was intending to borrow to purchase a house or car. But do you know the legal and possible financial implications of signing a personal guarantee?
In this video we will look at 5 things you need to know about personal guarantees before you proceed.
If I Provide my Personal Guarantee, am I Liable for Another's Debts?
As a rule of thumb, one person will not be liable for the debts of another, even where that person is your spouse, partner or child.
However, if you sign a personal guarantee, you are deemed a Guarantor for the obligations of another, and you take legal responsibility for that person’s obligations.
What Words Should I look for when Scrutinising a Contract with a Personal Guarantee?
It's vital that you carefully read and scrutinise any contracts or agreements before signing. When it comes to personal guarantees, be sure to look for words such as “guarantee”, “guarantor”, “promise” or “personal capacity”. It is difficult to dispute what you have signed, even if you did not read the fine print. If you are unsure of the meaning of any phrases or obligations within the agreement, be sure to ask and even seek legal advice.
What are My Obligations as a Guarantor?
Be sure what your obligations are as a Guarantor. Ask yourself “What am I promising to do on behalf of the other party?”
What Consequences can a Guarantor Face?
Signing a personal guarantee has vast legal and financial consequences. If claims are brought against the Guarantor, legal costs can accumulate, judgement can be obtained against you personally, which can involve the seizure and selling of your assets.
Do Personal Guarantees Expire? Is there a Time Limit?
Generally personal guarantees have no time limit and cannot be cancelled by the Guarantor. Obligations arising from personal guarantees can therefore even be enforced against your estate in the event of death.
Our team has a wealth of experience handling personal guarantees and their legal implications. If you have any questions before you give a personal guarantee, please contact us - the Argon Law team would be happy to assist.
