Thinking About Guaranteeing Somebody Else’s Debts?

John Kafrouni

09 Nov 2013

•

min read

Providing your personal and/or business assets as security for the debts of another business/person involves the highest amount of risk to the financial security of yourself and/or your business.

Think it’s safe to rely on what a member of your own family tells you about being their guarantor?

Please think again and consider the following case study. No matter how well you may know a family member, do not accept their interpretation of your obligations under a document they want you to sign or their assurances that “you’ll be right” without making your own inquiries. While it may not be pleasant or easy to refuse a family member who appears to be in trouble, they may well be asking you for more than you can give them.

People from non-English speaking backgrounds can be especially vulnerable to the dangers of unlimited guarantees. The complicated phrasing of contractual documents that often place important information in the fine print is a challenge even for native English speakers but can be near impossible for people from non-English speaking backgrounds to unravel.

Consider the following case study:

V asks his parents to help him and his business out of debt by signing a document from the bank. He assures them that it will be alright but misleads them as to the time and amount of the guarantee. V’s parents do not understand written English and rely on their son to look out for them.

The parents sign what turns out to be an agreement that gives the family home and their savings as security for their son’s present and future debts. The bank repossesses their home when the son can’t pay (Commercial Bank of Australia v Amadio (1983) 151 CLR 447).

Reader’s Tip

The most effective way to prevent yourself from being caught up in a similar situation is to be vigilant. Remember, you are under no legal obligation to sign anything you are uncomfortable with. You always have the right to seek legal advice about any document that requires your signature and no-one can make you sign it against your will. Finally, never commit what you cannot afford to lose, especially to a family member.

Joe Kafrouni
Legal Practitioner Director
Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

Liability limited by a scheme approved under professional standards legislation.

What People Say

Joe Kafrouni helped me in my acrimonious shareholders dispute, resulting in Supreme Court litigation. During my case, which took years to resolve, I appreciated Joe’s great concern for my well being and that of my family. I felt he was attentive, direct and provided me with sound advice. In the end, Joe skilfully negotiated a settlement that exceeded my expectations and I am grateful.

Thank you, Joe. It was a pleasure working with you to resolve the matter today. In particular, I appreciated your patience to fully understand each party’s position and to bed down a final heads of agreement to conclude the resolution between the parties.

Joe Kafrouni has been our company’s lawyer from the beginning and has been instrumental in our journey as company owners and directors. When dealing with both complex and sensitive company issues, Joe is able to provide us with clearly articulated strategies that are well thought‐out and with the bigger picture in mind. He genuinely cares and is always willing to share his personal views, which are both honest and just. Joe is highly professional and knowledgeable in his field. You will definitely benefit having him on your team.

Joe, I appreciate it was a very long day yesterday but we got there in the end. I thought you did a great job and I enjoyed watching your approach and the way you conducted the mediation.

Joe, as you know we were in a very difficult position with our company before we engaged you as our lawyer and fortunately, even with the odds stacked heavily against us in our shareholders dispute, you managed to pull us through to victory. You are a true credit to the industry not only because of your skilled negotiating tactics but also due to your personable nature, which made us feel comfortable in such a volatile situation.

The biggest lesson I have learnt from you recently, Joe, is that it pays to have a professional such as yourself on my side to deal with matters that I am unequipped to handle … so I can carry on with the task at hand of building my business! Thanks again, I’ll take pleasure in recommending your services to anyone in need.

A big thank you for your time today, Joe. Thankfully we managed to strike a deal although it took a little while to do. Thanks for your patience and perseverance.

Contact

Let’s talk.

‍

I take on a limited number of matters so I can give each my full attention with the time I have.

‍

To keep things simple and fair, I offer an initial paid consultation that you can book here. It’s a chance for us to speak directly about your needs — no obligations, no pressure.

‍

If you're ready to move forward, you can choose a time that suits you and pay the initial consultation fee securely when you book.

‍

This approach helps me focus on clients who are serious about getting the right advice and ensures I can give you the time and care the matter deserves.

‍

I allow up to 1.5 hours for the consultation. Afterward, you’ll receive a short summary of what we discussed and any recommended next steps.

‍

This approach helps me work closely with clients who are serious about getting the right advice — and ensures I can give them the attention they’re paying for.

Table of contents

What People Say

Contact