Loan guarantors: beware of your risks

Loan guarantors are different from any other forms of risk-based contracts in that they are not governed by the principle of uberrimae fidei. The onus is on loan guarantors to seek all information on the person/entity on which they are prepared to give guarantees rather than on the person/entity seeking guarantees. The limitations/caveats entered into a guarantee agreement in relation to a loan or investment by the person/ entity seeking a guarantee should be carefully considered by prospective guarantors.

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Introduction

Over the years the English courts have been asked to pronounce on the scope of the rights of guarantors in relation to various types of guarantee, and the scope of the duty of disclosure on the part of the party which seeks a guarantee.