Use Of Guarantee Agreement

As a general rule, the guarantor is not liable if the principal debt cannot be invoked. In England, it has never been decided whether this rule applies in cases where the principal debtor is a minor and is therefore not liable to the creditor. [50] If the directors guarantee the performance of a contract by their company that is beyond their powers and is therefore not related to the company, the directors` liability to them is personally applicable. [51] One of the key elements of any contract is the intention of the parties to be bound to it. Where a party is subject to unlawful influence by a third party, this may mean that the party did not have the required contractual intent. There are many types of unacceptable influence or coercion that may affect contractual obligations in general and collateral in particular. In this context, the most common scenario is to make a third party (often a husband or wife of the business owner) the party of guaranteeing the company`s liabilities to the bank. The law has changed in recent years with respect to these situations and is now fully included in the doctrine of “presumed inadmissible influence”. The extent of the debt that the guarantor owes to this debt is co-extended with the commitment of the third party. [3] This is a guarantee contract which does not erase the initial payment or performance obligation and is subject to the main obligation. [4] If the initial commitment fails, it will be disregarded. In England, there are two forms of guarantee, (1) which favour a conditional payment, the guarantor paying in case of failure of the main obligation.

With this form, the warranty is not applicable until an error occurs. [5] (2) A “see-to-it” obligation in which the guarantor is required to ensure that the principal fulfils the obligation. Otherwise, the guarantor automatically violates his contractual obligation, on which the creditor can take legal action. [6] If the guarantor`s liability is less than that of the principal debtor, the question arises in England and America as to whether the guarantor is liable for only part of the debt corresponding to the limit of its liability or up to that limit for the entire debt. [48] The guarantor can only be held liable for damage suffered as a result of the guaranteed delay. In addition, in the case of a joint and several guarantees, several guarantees, unless they are all signed, none is subsequently liable. [49] The guarantor`s limitation of liability must be interpreted in such a way that what can be leniently accepted as the written intent of the parties takes effect. . . .