Personal Guarantee Agreement (England & Wales)
This Personal Guarantee Agreement (the "Guarantee") is entered into on [Guarantee Date] and is made pursuant to and in compliance with section 4 of the Statute of Frauds 1677.
PARTIES
(1) [Guarantor Name], residing at [Guarantor Address], [Guarantor City], [Guarantor County], [Guarantor Postcode], England (the "Guarantor");
(2) [Debtor Name], [Debtor Type], with its registered or principal address at [Debtor Address], [Debtor City], [Debtor Postcode], England (the "Principal Debtor"); and
(3) [Creditor Name], with its registered or principal address at [Creditor Address], [Creditor City], [Creditor Postcode], England (the "Creditor").
BACKGROUND
A. The Principal Debtor has incurred or is about to incur obligations to the Creditor pursuant to [Underlying Agreement] (the "Underlying Agreement").
B. The Creditor has required, as a condition of entering into or continuing the arrangements giving rise to the guaranteed obligations, that the Guarantor provide this personal guarantee.
C. The Guarantor has agreed to provide this Guarantee in consideration of the Creditor entering into or continuing the Underlying Agreement with the Principal Debtor, which the Guarantor acknowledges constitutes good and valuable consideration.
NOW, THEREFORE, in consideration of the premises and the mutual obligations set out in this Guarantee, the Guarantor agrees as follows:
1. GUARANTEE
1.1 The Guarantor hereby irrevocably and unconditionally guarantees to the Creditor the due and punctual performance and discharge by the Principal Debtor of [Guarantee Scope] (the "Guaranteed Obligations"), including the payment of all sums of money due or to become due from the Principal Debtor to the Creditor.
1.2 If the Principal Debtor fails to perform or discharge any Guaranteed Obligation when due (whether by reason of insolvency, default, or otherwise), the Guarantor shall, upon written demand from the Creditor in accordance with Clause 4, immediately pay, perform, or discharge (or procure the payment, performance, or discharge of) such Guaranteed Obligations as if the Guarantor were the principal obligor and not merely a surety.
1.3 The Guarantor's obligation under this Guarantee is a secondary obligation, arising only upon the failure of the Principal Debtor to discharge the Guaranteed Obligations. This Guarantee complies with the requirements of section 4 of the Statute of Frauds 1677.
2. MAXIMUM LIABILITY
2.1 The Guarantor's aggregate liability under this Guarantee shall not exceed £[Max Liability Amount] ([Max Liability Words]) (the "Maximum Liability"), exclusive of any interest accruing on overdue amounts and exclusive of any reasonable legal costs incurred by the Creditor in enforcing this Guarantee following a default.
2.2 The Maximum Liability shall not be construed as a limitation on the Creditor's right to recover interest, costs, and expenses separately from the Creditor's other rights under this Guarantee or at law.
3. DURATION
3.1 This Guarantee shall remain in full force and effect [Guarantee Duration]. The expiry or termination of this Guarantee shall not affect any liability of the Guarantor that has already accrued prior to such expiry or termination.
3.2 This Guarantee is a continuing guarantee and shall not be discharged by any intermediate payment or partial satisfaction of the Guaranteed Obligations, but shall remain in force until all Guaranteed Obligations (up to the Maximum Liability) have been discharged in full.
4. DEMAND
4.1 The Creditor shall give the Guarantor not less than [Demand Notice Days] calendar days' prior written notice before making a formal demand for payment under this Guarantee. The written demand shall specify: (a) the amount claimed; (b) the nature of the Principal Debtor's default; and (c) the Creditor's intention to call on this Guarantee.
4.2 The Guarantor shall pay the demanded amount within [Demand Notice Days] calendar days of receipt of the written demand, or such longer period as the Creditor may specify in the demand.
4.3 A written demand made under this Clause shall be sufficient if addressed to the Guarantor at the address set out in this Guarantee and delivered by hand, recorded postal delivery, or email to [Guarantor Email].
5. CONTINUING GUARANTEE AND PRESERVATION
5.1 This Guarantee shall not be affected, released, or discharged by: (a) any amendment, variation, novation, supplement, or replacement of the Underlying Agreement, whether or not with the Guarantor's knowledge or consent; (b) any extension of time or indulgence granted by the Creditor to the Principal Debtor; (c) the release or discharge of the Principal Debtor from any liability; (d) the taking, variation, compromise, exchange, renewal, or release of any rights or security by the Creditor; or (e) any other act, event, or omission that would, but for this Clause, operate to discharge the Guarantor.
5.2 This Clause shall apply irrespective of whether the Guarantor has been notified of or has consented to any of the events referred to above.
6. SUBROGATION AND SUBORDINATION
6.1 Following payment in full by the Guarantor of any amount demanded under this Guarantee, the Guarantor shall be subrogated to the rights of the Creditor against the Principal Debtor to the extent of such payment, but the Guarantor shall not exercise any such rights until all Guaranteed Obligations have been fully discharged.
6.2 Until all Guaranteed Obligations have been discharged in full, the Guarantor shall not, without the Creditor's prior written consent: (a) exercise any right of contribution, reimbursement, or indemnity against the Principal Debtor; or (b) prove or claim in the insolvency, liquidation, or administration of the Principal Debtor in competition with the Creditor.
7. GUARANTOR'S REPRESENTATIONS AND WARRANTIES
7.1 The Guarantor represents and warrants to the Creditor that:
- the Guarantor is aged 18 or over and has full legal capacity to execute and perform this Guarantee;
- this Guarantee constitutes the legal, valid, and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms;
- the execution and performance of this Guarantee do not and will not contravene any applicable law, court order, or existing contractual obligation of the Guarantor;
- the Guarantor is not insolvent, has not been made bankrupt, and is not subject to any individual voluntary arrangement, debt relief order, or analogous insolvency proceeding; and
- the Guarantor has not been induced to enter into this Guarantee by any misrepresentation, undue influence, or duress on the part of the Creditor, the Principal Debtor, or any other person.
8. NOTICES
8.1 All notices and demands under this Guarantee shall be in writing and may be delivered by hand, recorded postal delivery, or email. Notices to the Guarantor shall be sent to the address set out in this Guarantee or to [Guarantor Email]. A notice delivered by hand shall be deemed received on the day of delivery; by recorded post, two Business Days after posting; by email, on the next Business Day after sending.
9. MISCELLANEOUS
9.1 This Guarantee constitutes the entire agreement between the parties with respect to the Guarantor's obligations under it and supersedes all prior discussions and agreements relating to the same subject matter.
9.2 No amendment to this Guarantee shall be effective unless made in writing and signed by the Guarantor and the Creditor.
9.3 If any provision of this Guarantee is or becomes invalid, void, or unenforceable in any jurisdiction, the validity and enforceability of the remaining provisions shall not be affected.
9.4 A person who is not a party to this Guarantee has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.
9.5 No failure or delay by the Creditor in exercising any right or remedy under this Guarantee shall operate as a waiver of that right or remedy.
10. GOVERNING LAW AND JURISDICTION
10.1 This Guarantee and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it or its subject matter or formation shall be governed by and construed in accordance with the laws of England and Wales.
10.2 Each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this Guarantee or its subject matter or formation.
IN WITNESS WHEREOF, the Guarantor has executed this Personal Guarantee Agreement on the date first written above.
THE GUARANTOR
Full name: [Guarantor Name]
Address: [Guarantor Address], [Guarantor City], [Guarantor County], [Guarantor Postcode], England
Guarantor
________________
Signature
Date: ________________
Witness (if applicable)
________________
Signature
Date: ________________
Creditor (for acknowledgement)
________________
Signature
Date: ________________
What Is a Personal Guarantee Agreement (England & Wales)?
A Personal Guarantee Agreement in the United Kingdom sets the amount advanced, the interest, the repayment schedule, and the security or guarantee backing the debt, with its requirements set by the Financial Services and Markets Act 2000.
Under English law, a guarantee is a secondary obligation: the guarantor's liability arises only if and when the principal debtor defaults. This distinguishes a guarantee from an indemnity, which is a primary obligation under which the indemnifier is liable regardless of whether the principal debtor is liable. The secondary nature of a guarantee means it must comply with the Statute of Frauds and the guarantor's potential liability cannot exceed that of the principal debtor. If the underlying obligation is void or unenforceable, the guarantee generally falls away with it.
The law of personal guarantees has been significantly shaped by two landmark House of Lords decisions. In Barclays Bank plc v O'Brien [1994] 1 AC 180 and Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, the courts established the principles governing when a guarantee may be set aside on grounds of undue influence or misrepresentation, and the steps creditors must take to protect the enforceability of guarantees obtained from individuals who have a close personal relationship with the principal debtor. The 'Etridge principle' — requiring independent legal advice for guarantors who have personal relationships with the debtor — is now standard commercial practice.
A well-drafted Personal Guarantee Agreement should include a clear description of the guaranteed obligations, a maximum liability cap expressed in pounds sterling, a demand notice procedure, and provisions addressing the common law defences available to guarantors (such as the rule in Holme v Brunskill (1878) 3 QBD 495, which discharges a guarantor if the creditor materially varies the underlying agreement without the guarantor's consent). Our template incorporates all of these key provisions and is governed by the laws of England and Wales.
The legal framework governing the Personal Guarantee Agreement (England & Wales) in United Kingdom draws on several key statutes and regulatory bodies. Under the Financial Services and Markets Act 2000 (FSMA), the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) regulate financial services. The Consumer Credit Act 1974 governs consumer lending. HM Revenue and Customs (HMRC) applies stamp duty land tax under the Finance Act 2003. The Financial Ombudsman Service (FOS) resolves consumer financial disputes. The Bank of England sets monetary policy under the Bank of England Act 1998. Parties executing a Personal Guarantee Agreement (England & Wales) in United Kingdom should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Financial Services and Markets Act 2000 sets the foundational requirements.
When Do You Need a Personal Guarantee Agreement (England & Wales)?
A Personal Guarantee Agreement is required across a wide range of commercial and personal situations in England and Wales, wherever a creditor requires additional security beyond the assets of the principal debtor.
Commercial lending is the most common context. When a bank or other lender extends a loan, overdraft, or credit facility to a limited company, it will routinely require one or more directors or shareholders to provide a personal guarantee. Because a limited company has separate legal personality under the Companies Act 2006, the company's debts are not automatically those of its directors. A personal guarantee pierces this corporate veil and creates direct personal liability for the guarantor if the company defaults.
Commercial lease transactions frequently require personal guarantees. When a landlord grants a commercial lease to a company, the landlord may require a director to personally guarantee the company's obligations under the lease, including rent payments, service charges, and dilapidations. This is particularly common for new or growing businesses that cannot demonstrate a sufficient financial track record.
Supplier and trade credit arrangements may also require guarantees. A supplier who provides goods or services to a limited company on credit terms may require a director's personal guarantee to protect against the risk of non-payment, particularly when dealing with a new or financially weak customer.
Intra-group lending between companies in the same corporate group often involves a parent company guaranteeing the obligations of a subsidiary, or a holding company providing a guarantee to support a subsidiary's trading. While technically a corporate guarantee, the underlying legal principles are similar to those governing personal guarantees.
Personal guarantees are also used in private lending arrangements between individuals, where a third party guarantees the borrower's obligations under a personal loan agreement. This is common where the borrower's creditworthiness is uncertain and the lender requires additional comfort that the debt will be repaid. The guarantor should always seek independent legal advice before signing, given the potentially significant financial consequences of the principal debtor's default.
What to Include in Your Personal Guarantee Agreement (England & Wales)
Compliance with the Statute of Frauds 1677 is the threshold requirement for a personal guarantee to be enforceable. Section 4 of the Act requires the guarantee to be evidenced in writing and signed by the guarantor. The written document must identify the guarantor, the principal debtor, the creditor, the scope of the guaranteed obligations, and the consideration (which is typically the creditor's agreement to enter into or continue the arrangement giving rise to the guaranteed obligations).
The scope of the guaranteed obligations must be precisely defined. The guarantee may cover all sums owed by the principal debtor to the creditor, however arising (an 'all-monies' guarantee), or it may be limited to specific obligations under a particular agreement. The guarantor should confirm they understand precisely what they are guaranteeing, as the scope directly determines their potential financial exposure.
The maximum liability cap is a critical protection for the guarantor. Without a cap, the guarantor's exposure is unlimited and could extend to all the debts of the principal debtor. The cap should be expressed as a specific monetary amount in pounds sterling and clearly state whether it includes or excludes interest, legal costs, and other expenses.
The demand notice provisions specify the procedure the creditor must follow before calling on the guarantee. Typically, the creditor must give the guarantor a specified number of days' written notice identifying the amount of the principal debtor's default. This gives the guarantor an opportunity to remedy the default or obtain payment from the principal debtor before the guarantee is enforced.
The independent legal advice confirmation, following the Etridge principle, is strongly recommended. The guarantor should confirm in the agreement that they received advice from a named solicitor who is independent of both the creditor and the principal debtor. This significantly reduces the risk of the guarantee being set aside for undue influence.
The waiver of defences clause, based on the rule in Holme v Brunskill (1878) 3 QBD 495, prevents the guarantor from being automatically discharged from liability if the creditor varies the underlying agreement, grants extensions of time, or releases security without the guarantor's consent. Such clauses are standard in commercial guarantees and are generally upheld by English courts.
The subrogation and subordination provisions protect the creditor's interests by confirming the guarantor cannot compete with the creditor in recovering from the principal debtor until all the guaranteed obligations are fully discharged.
Governing law and jurisdiction must be stated as England and Wales, confirming the guarantee is interpreted under English law and that any disputes are resolved by the English courts.
Additional compliance elements for a Personal Guarantee Agreement (England & Wales) used in United Kingdom include: Under the Financial Services and Markets Act 2000 (FSMA), the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) regulate financial services. The Consumer Credit Act 1974 governs consumer lending. HM Revenue and Customs (HMRC) applies stamp duty land tax under the Finance Act 2003. The Financial Ombudsman Service (FOS) resolves consumer financial disputes. The Bank of England sets monetary policy under the Bank of England Act 1998. Forms-legal.com provides this template as a starting point for United Kingdom-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Personal Guarantee Agreement (England & Wales) (United Kingdom) [Legal document template]. Forms Legal. https://forms-legal.com/uk/financial/loans/personal-guarantee-agreement-england-wales
"Personal Guarantee Agreement (England & Wales) (United Kingdom)." Forms Legal, 2026, https://forms-legal.com/uk/financial/loans/personal-guarantee-agreement-england-wales.
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note = {Free legal document template. Based on Financial Services and Markets Act 2000}
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Frequently Asked Questions
Under section 4 of the Statute of Frauds 1677, a guarantee — defined as a promise to answer for the debt, default, or miscarriage of another person — must be evidenced in writing and signed by the guarantor or their authorised agent. An oral guarantee is unenforceable. The written document must identify the guarantor, the principal debtor, the creditor, the nature of the guaranteed obligations, and the consideration for the guarantee (typically the creditor agreeing to extend credit or continue a business relationship with the debtor). The guarantee must also satisfy the general requirements of a valid contract under English common law: offer, acceptance, consideration, and intention to create legal relations. A guarantee is a secondary obligation — it is distinct from an indemnity, which is a primary obligation and does not require compliance with the Statute of Frauds.
The 'Etridge principle' derives from the House of Lords decision in Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, which built on the earlier authority of Barclays Bank plc v O'Brien [1994] 1 AC 180. These cases establish that where a guarantor has a close emotional relationship with the principal debtor (such as a spouse, civil partner, parent, or business partner), the creditor is put on constructive notice that the guarantee may have been procured by undue influence. To protect the enforceability of the guarantee, the creditor should confirm the guarantor has received independent legal advice from a solicitor who is not acting for the debtor or the creditor. If the creditor fails to take this step and the guarantee is later challenged on grounds of undue influence, the guarantee may be set aside and unenforceable. The independent solicitor should explain the nature and extent of the guarantor's potential liability, the risks involved, and the circumstances in which the creditor may call on the guarantee.
The rule in Holme v Brunskill (1878) 3 QBD 495 provides that a guarantor is automatically discharged from liability under a guarantee if the creditor materially varies the underlying agreement between the creditor and the principal debtor without the guarantor's prior consent. This rule exists to protect guarantors from having the scope of their liability extended without their knowledge. However, in commercial practice, creditors seek to mitigate this risk by including a 'waiver of defences' clause in the guarantee, under which the guarantor expressly agrees that their liability will not be discharged or reduced by any variation of the underlying agreement, extension of time, release of security, or other act that would otherwise discharge a surety at common law. English courts generally uphold such waiver clauses, provided the guarantor entered into them freely and with knowledge of their effect, particularly where independent legal advice was obtained.
Yes, and this is extremely common in practice. A limited company has separate legal personality under section 16 of the Companies Act 2006, meaning its directors and shareholders are not normally personally liable for the company's debts. However, banks, commercial landlords, suppliers, and other creditors routinely require company directors (or other individuals associated with the company) to provide personal guarantees as a condition of extending credit, granting a commercial lease, or entering into significant commercial arrangements. If the company defaults on its obligations, the creditor can then pursue the guarantor personally for the outstanding amounts, up to any agreed maximum liability cap. Directors who are considering giving a personal guarantee should seek independent legal advice before signing, as the financial consequences of the company's failure can be personally devastating.
Once a guarantor has made payment under a personal guarantee, English law gives them certain rights of recovery. The right of subrogation allows the guarantor to 'step into the shoes' of the creditor and assert the creditor's rights against the principal debtor, to the extent of the payment made. This includes the right to benefit from any security held by the creditor. The right of indemnity and contribution allows the guarantor to seek reimbursement from the principal debtor (indemnity) and, where there are multiple co-guarantors, to recover a proportionate contribution from them. However, these rights are subordinated to the creditor's interests: the guarantor cannot exercise them until all the guaranteed obligations to the creditor have been fully discharged. Under the Limitation Act 1980, the guarantor has six years from the date of payment to bring a claim for reimbursement against the principal debtor.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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