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Enforceability of Guarantees after Death of Guarantor

June 6, 2017 By Kazi Portolesi Lawyers

Concept of Guarantees

A guarantee is a promise made by a party to make payment or meet the obligations owed by another party.

Commonly, directors provide guarantees to a creditor in exchange for the creditor providing goods or services to the director’s company on a running account.

Consideration for providing guarantees can be divisible or entire. An example of a divisible guarantee is the director’s guarantee illustrated above. These can be revoked once notice is given. The guarantor will be liable for debts or obligations up to the date of revocation but has no liability for debts or obligations occurring after that date.

An example of a guarantee when entire consideration is given is where a guarantee is provided in exchange for a loan. Entire guarantees cannot be revoked.

Revocation of Guarantee after Death

If the guarantee is divisible then the guarantee can be revoked. The guarantee is revoked from the date a notice of death is received by the creditor in relation to future transactions.

Continuation of Guarantee after Death

If the guarantee indicates it is to continue and not revoked by death or that it extends to the guarantor’s executors or personal representatives then the guarantee can continue after death. Creditors can claim for distribution from the guarantor’s deceased estate for debts owed to them.

Filed Under: Contracts

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