You may have been asked to sign a document as Guarantor – whether it be entering into a commercial lease, for your spouse or partner if they are borrowing money or for your child if they are borrowing 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.
- 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.
- Contracts and agreements must be carefully read and scrutinised before signing. Keep a look out 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, ask.
- Be sure what your obligations are as a Guarantor. Ask yourself “What am I promising to do on behalf of the other party?”
- Signing a personal guarantee has vast legal and financial consequences. If claims are brought against the Guarantor, legal costs can accumulate, judgment can be obtained against you personally, which can involve the seizure and selling of your assets.
- Generally personal guarantees have no time limit and cannot be cancelled by the Guarantor. Obligations arising from personal guarantees can even be enforced against your estate in the event of death.
If you have any questions before you give a personal guarantee, please contact us, we would be happy to assist.