Co Guarantor Agreement Template for England and Wales

A Co Guarantor Agreement is a legally binding document that establishes the framework when multiple parties jointly guarantee another person's or entity's financial or performance obligations. Under England and Wales law, this agreement creates a safety net for creditors while clearly defining the responsibilities and rights of each guarantor involved in the arrangement.

When do you need this document?

You need a Co Guarantor Agreement when multiple people are willing to guarantee the same debt or obligation, such as when family members jointly guarantee a business loan or when business partners provide collective security for commercial financing. This document is essential in property transactions where multiple guarantors support a mortgage application, or when shareholders guarantee company debts to secure better lending terms. The agreement becomes crucial in situations where the primary debtor's creditworthiness alone is insufficient, and multiple guarantors can provide the additional security that creditors require.

Key legal considerations

The agreement must clearly establish whether the guarantors are jointly and severally liable, meaning each guarantor can be held responsible for the entire debt, or whether their liability is proportionate to their agreed share. You should pay careful attention to the guarantee's scope, including whether it covers interest, costs, and additional charges beyond the principal amount. The document must specify the duration of the guarantee and any conditions for release, as well as each guarantor's rights of contribution against other guarantors if they pay more than their fair share. Important clauses should address what happens if one guarantor becomes insolvent or withdraws from the arrangement, and whether the remaining guarantors' liability increases accordingly.

Legal requirements in England and Wales

Under the Statute of Frauds 1677, all guarantee agreements must be in writing and signed by each guarantor to be legally enforceable, making proper documentation essential. The Consumer Credit Act 1974 applies additional protections when the guarantee relates to consumer credit, requiring specific disclosure and cooling-off periods. If any guarantor is acting as a consumer rather than in a business capacity, the Consumer Rights Act 2015 governs the fairness of contract terms and imposes transparency requirements. The Unfair Contract Terms Act 1977 controls unreasonable exclusion clauses, particularly in business-to-business arrangements. The agreement must comply with the Misrepresentation Act 1967, ensuring that all statements made during formation are accurate and that appropriate remedies are available if misrepresentation occurs. Financial services regulations may also apply depending on the nature of the underlying obligation being guaranteed.