Personal guarantees are legally binding agreements where an entity (the guarantor) enters into a contract to be responsible for another entity (the guaranteed) in a matter where the guarantor is a non-party. This kind of agreement usually occurs in debt situations, and it is not something to be taken lightly. Hence, it is important to take note of the necessary dos and don’ts in drafting such agreements.

The California Civil Code 2819 and 2845 are the most important legal frameworks concerning personal guarantees. Both statutes detail the roles and obligations of the surety and creditors in a personal guarantee agreement. A personal guarantee can be of two types, They include;

  • Guarantee of payments;
  • Guarantee of collection.

Indeed, no two personal guarantees are the same, and each should be drafted to fit the specific objective.

It is important to allow skilled and knowledgeable legal professionals to draft a personal guarantee to avoid unforeseen complications or liabilities. There is a litany of legal defenses that a guarantor can lay claim to in avoiding liabilities.

Click this link to learn more about how you can avoid liabilities as a guarantor and the common mistakes that can be made in drafting personal guarantees.

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