An agreement to give a guarantee can be a guarantee

Where an individual signed a letter including an agreement to give a personal guarantee, the court decided that he was liable.

This case¹ started with a dispute about an amount owing by a property development company to an earth works contractor. The parties ended up signing a deed detailing how the dispute would be settled, but payments due under the deed fell into arrears. Following a meeting between the parties, the contractor wrote to the developer setting out payment arrangements and including a statement that personal guarantees were required from the property developer and his wife.

The developer made some hand-written amendments to the letter, signed it and returned it to the contractor. The letter included the words "we the undersigned agree to the repayment proposal above and give our personal guarantees".

The developer also sent a separate letter to the contractor stating that some of the arrangements set out in the first letter were unacceptable and that, while his wife was not able to give a personal guarantee, he was prepared to offer one.

A statutory demand was subsequently issued by the contractor and the property development company went into voluntary liquidation.

The issue for consideration by the High Court was whether or not the property developer guaranteed the company's debt to the contractor. The court decided that there was no question of fact in this case and that the developer's signing of the letter including the words "we the undersigned agree to the repayment proposal above and give our personal guarantees" meant that the developer did not have a defence to the contractor's claim.

¹ Wharehine Construction Limited v Simon Buxton , High Court, CIV 2006-404-3198, 4 December 2007

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