Q&As

When can a guarantor voluntarily revoke its liability under a guarantee?

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Produced in partnership with Tom Stewart Coats of XXIV Old Buildings
Published on: 09 May 2017
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Guarantees are a contractual arrangement where one party (the guarantor) agrees to answer for the liability of another party (the principal or principal obligor) to another party (the creditor/lender or guaranteed party).

Termination of a guarantor's liability

The liability of a guarantor can be terminated in a number of different ways:

  1. •

    firstly, the guarantee can be discharged by performance of the guaranteed obligation by the principal obligor or performance of the guarantee by the guarantor (see Practice Note: Discharging guarantees by repayment or performance and clawback considerations)

  2. •

    secondly, the parties can agree to release the guarantor (see Practice Note: Releasing guarantors by agreement between the parties)

  3. •

    thirdly, the guarantor’s liability might be discharged, extinguished or reduced by other circumstances including a material variation to the terms of the underlying contract which would prejudice the guarantor (see Practice Note: Guarantor protections and how to exclude them in guarantee documentation—waiver of defences clauses)

  4. •

    finally, the guarantor may be able to revoke its liability under

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United Kingdom
Key definition:
Contract definition
What does Contract mean?

A contract is a legally binding promise (oral or in writing) by one person to fulfil an obligation to another person in return for consideration. A binding contract comprises four elements: offer, acceptance, consideration and intention to create legal relations.

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