Bank Guarantee Explained
A guarantee must be evidenced by a written note or memorandum signed by the guarantors or their agent. Without such written evidence, a guarantee is unenforceable. Bank guarantees are, of course, always written contracts. A guarantee is a promise to answer ‘for the debt, default or miscarriage of another’, if that person fails to meet the obligation: Statute of Frauds 1677, s.4. Primary liability for the debt is incurred by the principal debtor. The guarantor incurs secondary liability, that is, the guarantor becomes liable only if the principal debtor fails to pay. If the principal debtor’s liability to the bank is void, the guarantor will not be liable.