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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3496
Experience:  Solicitors 2 years plus PQE
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Hi, I am 1 of 2 directors of a Ltd Company which we have had

Customer Question

Hi,
I am 1 of 2 directors of a Ltd Company which we have had to put into liquidation,however I have been told by our Bank and 1 supplier that as we signed as guarantors that we will have to pay back the money owed to them, although we signed the paperwork it was not explained to us our actual liability is this correct
R Stibbs
Submitted: 3 years ago.
Category: Law
Expert:  Alex J. replied 3 years ago.
Hi,

Thank you for your question and welcome to Just Answer.

Please can you tell me exactly what you signed? Was it executed as a deed? Does it "I hereby personally guarantee the debts of the Company"?

Did the bank ask you to obtain independent legal advice?

How much are the debts?

Kind regards

AJ
Customer: replied 3 years ago.

Barclays


Security


The overdraft facility is to be secured


By the Guarantee provided below and any other security held by us or in the future.


Guarantee


In consideration of this facility ,the guarantor named in the aknowledgement section below guarantees the payment of ,and will , on the banks written demand pay all money owed under this facility etc etc £11,000 O/D £4,500 loan


 


Trade supplier


The diectors shall sign the following undertaking -should the company fail to pay to the terms then the directors of the company will jointly and severally liable peronally for the full outstanding account plus any collection costs and this agreement will be honoured for a period of 48 complted trading months 21/8/12


Signed by us both


Regards


R Stibbs *****

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

The liquidator is correct this is not clear cut. In order for a guarantee to be enforceable it does have to be very specific. I have reason to suspect both these guarantees could be challenged.

Did the bank tell you to get independent legal advice?

Kind regards

AJ
Customer: replied 3 years ago.

Hi ,


No they did not suggest getting legal advise what do you sugest I do as I have to go into hospital next week and nee to get started on this asap so that they don't both suddenly demand payment .


Regards


R Stibbs *****
Expert:  Alex J. replied 3 years ago.
Hi,

Thank you.

I will got away and write a response. This may take some time but please do not be concerned if you do not hear from me right away, I will post it by tomorrow morning at the latest.

Kind regards

AJ
Customer: replied 3 years ago.

Thank You


Regards


R Stibbs

Expert:  Alex J. replied 3 years ago.
Hi,

Thank you for your patience.

One thing you must bare in mind is regardless of what I tell you about the enforceability of any guarantee, the beneficiaries of these guarantees are unlikely to go away just because you have been told they might be unenforceable. Whether they want to enforce their guarantees or not is their prerogative, therefore if you want to challenge them I would expect a fight.

1. The Law
- The basic point to consider regarding a guarantee is that it must comply with the Statute of Frauds;
- This means it must be in writing and it must form a valid contract.

2. The banks guarantee;
- Banks are required to treat you fairly, by simply forcing you to sign the guarantee in order to continue the facility this could be considered to be an abuse of their bargaining position;
- If they failed to direct you to obtain independent advice this could call into question the enforceability of the guarantee.

3. The supplier's guarantee;
- A supplier is not a bank and does not have the same obligations.
- The main issue with the supplier's guarantee is that it appears not to be a guarantee at all;
- Firstly it does not actually guarantee it only "undertakes" for you to pay something;
- Secondly it appears to lack any valid consideration that would make an enforceable contractual obligation on you personally.

4. Practical Steps:
- Dealing with the supplier's guarantee - When the supplier makes a demand I would write to the supplier and tell the supplier that you deny any liability as a guarantor. Say that the clause they are trying to rely is not a guarantee as it lacks an consideration. Tell the supplier that any attempt to demand money off you personally will be deemed as unlawful harassment under S.40 of the Administration of Justice Act 1970 - if they still wont leave you alone, you can either seek to settle their claim or the matter will end up in court.
- Dealing with the bank - if the bank have made a demand of you then write back to the bank and immediately ask to see a copy of the managers case file from when you signed the guarantee. Ask them to confirm they will take any action until you have taken professional advice. Until you see that case file we cannot really make a call on the enforceability of the guarantee. Banks have an obligation to treat you fairly and if it turns out they have not and abused their position you may have a claim with the Financial Ombudsman.

Were both documents executed as deeds?

Kind regards

AJ

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