Guarantee

It is often the case that debts that are difficult to collect from the debtor company as a result of inadequate checks being made by the client at commencement of business as to the financial strength of the company. It is therefore essential that you should check the credit rating of any potential new customer or client and where there is concern as to the ability of the company to make payment for goods or services supplied, then you should obtain a guarantee either from a parent company of sufficient financial standing or an individual to ensure performance of the contract.

It is essential that any guarantee is documented in writing and clearly places the guarantor under a binding and contractual obligation to meet the liabilities of the company or individual if they default in meeting their contractual obligations. It is essential that the wording of the guarantee is well drafted as the courts tend to construe the terms of a guarantee strictly and will only find that there is a third party liability if it is quite clear from the wording of the guarantee.

At Lee Pomeranc, we have experience in dealing with guarantees and drafting of the terms of the guarantees. Should you wish to obtain further information in relation to guarantees or incorporating them into your terms and conditions of business, then please contact Michael Lee on +44 (0)20 8201 6299.

This note is intended to be a brief general guide only and should not be used or relied on as a complete or authoritative source of legal information.

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