Personal Guarantee (PG), Company Director’s PG & PG Debt - Guide - Page 2
If you landed on this page & haven’t read the other page, you can visit our page by clicking on the link below or here. We have covered some basics & important aspects of Company Director’s Personal Guarantee in that guide like
Introduction to Personal Guarantee, Legal Requirements for a Guarantee, Enforceability of a Personal Guarantee, Ways to Get Out of a Personal Guarantee, and Examples of a Personal Guarantee. Click on the link below
Now that you are here after reading the other page, let’s understand other aspects of the Personal Guarantee like proper interpretation, loopholes, examples & more
Proper Interpretation of Personal Guarantees
- Reading the contract of guarantee and the terms of the guarantee; and
- Knowing what happened before and after the contract of guarantee was agreed: i.e. all of the relevant facts of the case.
- Whether or not a guarantee is enforceable is highly fact – a slight change of the facts can mean the difference between success and failure.
- Limited Opportunities to get out
- If you do get an opening to get out of a guarantee, that window of opportunity can be short before it closes on you.
Loopholes of Interpreting Personal Guarantees
That is, the contract can be interpreted in more than one way.
Differences in interpretation – of “the construction of the contract” may mean the difference between success and failure of the guarantor avoiding liability.
It is important stuff if you are a guarantor who believes that it would be wrong for you to be liable.
In “Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank plc” , it was said in respect of the interpretation of contracts:
- against the background of an admissible matrix of facts known to or at least reasonably available to the parties, the meaning sought is that of the language in question would convey to the reasonable man.
- Consider evidence outside the contract to ascertain who was to receive the benefit of a guarantee
- Interpret a contract to correct a mistake in its preparation
- See past allegations, which are not supported by documentary evidence, but merely oral evidence
- Ignore words, which attempt to exclude or limit the application of the general law, which would be to the advantage of the guarantor
What is a Personal Guarantee on a Business Loan?
Directors’ Personal Guarantees
Recovery by Creditor from Guarantor
What is an “Unlimited Personal Guarantee”?
“Is it a Guarantee?” Guarantees vs Indemnities
|Amount of liability
|Same as the debtor, usually
|Independent of any guarantee
|When the debtor is in breach of contract
|When indemnifier is in breach of contract
|Given in writing?
|Signed by the guarantor
|Compensate the loss of another person
|Parties to Contract
|Creditor, principal debtor and guarantor
|Indemnified and indemnifier
|Past consideration – good consideration
|Variation to guarantee agreed between creditor and debtor
|Guarantee void under general law
Challenging Personal Guarantees
Mounting Business Debt and Personal Guarantee Support
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