Guarantor not liable for unsigned guarantee

In a recent case the Supreme Court has held that a guarantor under a $50,000 loan is not liable to repay the loan because of an error in the documentation by the lender.

Although the borrower had signed the loan agreement for his company to borrow the money and he also signed as a guarantor, the loan agreement made no reference to what he was guaranteeing.  It referred to separate guarantees to be signed.  The lender omitted to get any separate guarantee documents signed.  The Court held that all guarantees must be in writing and that the failure to get the separate guarantee documents drawn up and signed was fatal to the claim against the guarantor.

It is important to follow all of the legal requirements when advancing money to a borrower and the failure to complete the paperwork in this case has resulted in a significant loss to the lender.

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