Personal Guarantee on Company HP agreement

[gill.pritchard]

Hi, I am looking for advice regarding a HP agreement taken out by our small limited company. The limited company ceased trading due to insolvency and does not have sufficient funds to go into administration so we have ceased trading and advised creditors that we intend to strike the company off. My problem is that the company had a HP agreement for a van. When the company defaulted on payment the HP company said that the van should be sold and informed us that the director would be liable to pay the balance (about £7500) because apparently he signed a personal guarantee and indemnity agreement. The director was not aware of the personal guarantee until the HP company told him after him limited company ceased trading.
When the van was bought the director originally intended to buy the van in his own name and take out a HP agreement in his own name. At this time the company had previously bought four vans on HP (WITHOUT personal guarantee) form the same sales company (but for the other vans the sales company had used a different finance company). The van was already on its way to be delivered when the director changed his mind and asked the sales company to cancel the personal HP agreement and re-draft a HP agreement in the companies name. It was implied that the company's HP agreement would be the same as previous agreements for the other vans bought from the same people i.e. no personal guarantee.
We took receipt of the van and the director signed the HP agreement, which was now an unregulated agreement in the companies name. It turns out that he also signed, without realising it, a personal guarantee and indemnity agreement.
The agreement was signed on the bonnet of a car, in a car park, in a great hurry. In this setting the director did not properly check what he was signing and was under the impression that it was similar to previous HP agreements obtained via the same sales company for other vans, i.e. no personal guarantee. In fact liability was the only reason for changing the agreement from a personal HP agreement in his name to an agreement in the Companies name. The representative did not check or copy any personal identification either.
We are wondering whether there is anything in law that protects you from this type of mistake. In reality, he did not read what he was signing because he was in a car park, in a hurry, waiting for the guy to hand over the keys. Also, the director was not given copies of what he had just signed. The result being that he did not know he was personally liable until after the company ceased trading and defaulted on the HP agreement.
I would be very grateful for any suggestions.
Many thanks
Gillian

[Guest]

Re: Personal Guarantee on Company HP agreement

It might be possible to claim the document the director signed was not in fact a reflection of the terms that had been agreed between the parties. In this case it may be possible to claim the equitable remedy of rectification, which is where a court orders a change in a written document to reflect what it ought to have said in the first place, although more information would be needed on why a director could be in the position of signing such a guarantee unknowingly. Was the director blind, could he not read, was he not shown the documents or was he made to sign under duress? There is a high standard of proof required to prevent the doctrine of certainty being undermined - simply put, courts dislike exercising their power to change a contract to which the parties have freely agreed between themselves.

The problem you may face is that in the interests of certainty and to prevent fraud, the court will not usually allow a defendant to escape performance of a contract simply because he made a mistake, (Tamplin v James [1879]) but if one party is aware of the other's mistake and, by keeping quiet, unfairly derives some benefit from the error, there can be no objection to rectification. However, rectification will not be granted merely because one party has driven a hard bargain in the negotiations and the other party has not been sufficiently alert to the possible consequences of a particular provision of the agreement.

You must be in a position to adduce "convincing proof" that the contract document did not record the true intention of the parties (Joscelyne v Nissen [1970]) and the document must fail to record the intention of both parties (Riverlate Properties v Paul [1975]) unless, as above, you can show that you mistakenly harboured the belief that the contract did reflect the intention to have the HP agreement in the company name only, but in reality it did not and the HP Company were aware of this mistake.

You must be careful that this is not seen simply as a beneficial crisis and an attempt to use the cessation of trading of the limited company to avoid a legitimate debt.

[Billt]

Re: Personal Guarantee on Company HP agreement

The company that I worked for went into liquidation last Tuesday. I was employed as a diretor but had no shares or controlling intrest.
Since being made redundant I have received a letter from a solicitor acting for one of our suppliers claiming that I signed a personal guarantee of which I have know recollection. All though I do remember signing a form in March which I was told was to update thier records. The amount being claimed from me is over 22K is there any thing that I can do.

[Guest]

Re: Personal Guarantee on Company HP agreement

In order to offer any suggestions or guidance, you are going to have to provide more information. What did you actually sign? What were you told it was? Did you take advice before signing it?

[Billt]

Re: Personal Guarantee on Company HP agreement

In order to offer any suggestions or guidance, you are going to have to provide more information. What did you actually sign? What were you told it was? Did you take advice before signing it?

I signed a credit acciunt application although I already had a credit account with this company.
I was told this was a form to update their recods as they still had our old address.
I took no advice becuse I thought this was just a form to update their records.
I didnt even fill the form in as this was done by my buyer and he was also told that this was just to update thir records.

[Amethyst]

Re: Personal Guarantee on Company HP agreement

have you asked for a copy of this purported document ?

[Billt]

Re: Personal Guarantee on Company HP agreement

I have and I have signed the document

[Guest]

Re: Personal Guarantee on Company HP agreement

If you were misled over the purpose of the document you signed then it cannot be binding on you, but you would need to prove misrepresentation on behalf of the supplier.

In business transactions you do not enjoy the same protection that consumers enjoy. In business if you sign a document you are generally assumed to have read and understood the contract you were signing.

A personal guarantee is an explicit and common arrangement and would not look at all like a credit account application.

[Billt]

Re: Personal Guarantee on Company HP agreement

If you were misled over the purpose of the document you signed then it cannot be binding on you, but you would need to prove misrepresentation on behalf of the supplier.

In business transactions you do not enjoy the same protection that consumers enjoy. In business if you sign a document you are generally assumed to have read and understood the contract you were signing.

A personal guarantee is an explicit and common arrangement and would not look at all like a credit account application.

Thank you for your reply.

The document that I signed was a credit account application. It clearly says this on the form. As I have previously said I already had a credit account with these people and they told me that this was just to update their records.Why would I need a new account?

There is a box at the bottom of the form that says continuing guarantee this is where I signed.

The wording in this box was not very clear and does not mention personal guarantee or that I would be lible for monies owed by the company.

I never even filled in the form it was done by my buyer and he was told the same that it was to update their records.But I did sign it.

Below is a list of questions that I would like to ask their solicitor. Whay do you think?
I was misled into signing a personal guarantee
I was told I was signing a form to update their records on our account
I was never informed I was signing a personal guarantee. It was never explained to me that I would be liable for any debts owed by PW Goddard.
I wouldn’t have knowingly signed a personal guarantee as I have no financial interest in the company, and I was aware that the company was in financial difficulty at this time.
The wording of the guarantee is misleading and does not mention that it is a personal guarantee, or that I would be liable to repay any debt owed to the company; I was never advised to take legal advice before signing.
There was a witness present who filled in the application form; he was also told that this was a form to update their records
The company had a credit account agreement in place for many years so why would I want to open a new one?
Never received a copy of the credit account application form, nor the terms and conditions relating to this

[Guest]

Re: Personal Guarantee on Company HP agreement

I think you are making a mountain out of a molehill. If the document you signed was a credit account application form and that was stated on it, then it cannot be a personal guarantee. If it were so, it would have to be clearly indicated.

From the information you have provided so far, it seems to me that one of two things is going on and neither should be of any concern to you. Demand that the solicitors acting for the supplier provide a copy of the alleged personal guarantee and until they do, stop spending any time on this.

Now for your "questions." The first is a disaster for you - "I was misled into signing a personal guarantee"

So you admit that you signed one then? You then go on to repeat his admission in seven further statements.

Why would you do this?

Remember, when dealing with solicitors, in particular those who are attempting to issue proceedings against you, less is more. Give them nothing and let them prove that their client has a valid claim against you personally, not just the (now dissolved) company that you worked for.

[Billt]

Re: Personal Guarantee on Company HP agreement

I think you are making a mountain out of a molehill. If the document you signed was a credit account application form and that was stated on it, then it cannot be a personal guarantee. If it were so, it would have to be clearly indicated.

From the information you have provided so far, it seems to me that one of two things is going on and neither should be of any concern to you. Demand that the solicitors acting for the suppler provide a copy of the alleged personal guarantee and until they do, stop spending any time on this.

Now for your "questions." The first is a disaster for you - "I was misled into signing a personal guarantee"

So you admit that you signed one then? You then go on to repeat his admission in seven further statements.

Why would you do this?

Remember, when dealing with solicitors, in particular those who are attempting to issue proceedings against you, less is more. Give them nothing and let them prove that their client has a valid claim against you personally, not just the (now dissolved) company that you worked for.

Thanks for your reply. I am very woried about this.

Your advice has made me fell much better .

I will keep you advised.

Many Thanks

[Billt]

Re: Personal Guarantee on Company HP agreement

Thanks for your reply. I am very woried about this.

Your advice has made me fell much better .

I will keep you advised.

Many Thanks

Sorry to be a pain but I have just received this letter from their solicitor.

It says:

The secion for the continuing guarantee is contained within the same form as the credit account appliation form and is headed "continuing Guarantee". Clearly in your capacity as Director of the Company you should have been aware of your resposibilities asfar as that was concerned.

Our client is entitled to rely upon the guarantee which you provided to them and due to the liquidation of the company and having given you notice of our clients intention to proceed we are now taking steps to do so.

We would strongly suggest that you ask those representing you in this matter to contact this firm so that we may advise them of the position.

Have you any advise on this please?

[Amethyst]

Re: Personal Guarantee on Company HP agreement

Can you type up exactly, as far as you can read it, what the bit in box about continuing guarantee says.

[Billt]

Re: Personal Guarantee on Company HP agreement

Can you type up exactly, as far as you can read it, what the bit in box about continuing guarantee says.

CONTINUING GUARANTEE
NB if the customer is a limited liability company or partnership established less than three years the continuing guarantee below MUST be signed by a director or secretary (in the case of a limited liability company) or equal partner (in the case of a limited liability partnership)

To xxxxxxxxxxx limited

In consideration of your agreeing to grant credit facilities to the company or limited liability partnership described above ("the company") I hereby unconditionally guarantee the due and punctual performance and observence by the company of its obligations herein and under the conditions of sale overleaf and agree to indemnify and keep you indemnified against any ??????
or non observance by the company.

For information we were a limited liability company trading for 23 years.
I have also left out the name of the other company.

This guarantee was at the bottom of the credit account application

[Amethyst]

Re: Personal Guarantee on Company HP agreement

Here's full thing in that case

Continuing Guarantee
NB-If the customer is a limited liability company or partnership established less than three years the continuing guarantee below MUST be signed by a director or secretary (in the case of a limited liability company) or equity partner (in case of a limited libility partnership). It may also be required to be completed in other cases.

To xxxxxxxxxxxxxx Ltd
In consideration of your agreeing to grant credit facilities to the company or limited liability
partnership described above (“the Company”) I hereby unconditionally guarantee the due and punctual performance and observance by the Company of its obligations herein and under your Condition of Sale overleaf, and agree to indemnify and keep indemnified against any breach or non observance thereof by the Company.
Authorised Signature . . . . . . . . . . . . . .

on the back is there this clause,?

(c) you become insolvent or make any composition with your creditors or
have a receiver appointed of all or part of your undertaking or assets
or go into liquidation (save for the purposes of amalgamation or
reconstruction) and we shall be entitled to recover from you all our
loss including any loss profit or loss on re-sale.



Burger. Now this was signed 'to update' their records. The original contract you have, did this have the same clause in ?

This is a bit about continuing guarantees - Legal problems of credit and security - Google Books