PERSONAL GUARANTEES IN COMMERCIAL TRANSACTIONS: RIGHTS, DUTIES AND LIABILITIES OF GUARANTORS UNDER NIGERIAN LAW

Introduction

Personal guarantees are common in commercial transactions, particularly in bank loans, business financing, commercial leases and credit arrangements. A creditor may require an individual, often a director, shareholder, business owner or associate of the principal debtor, to personally guarantee the obligations of another person or company.

Although signing a guarantee may appear to be a mere formality, it can create significant personal financial liability.

A guarantor is a person who undertakes to answer for the debt, default or obligation of another person, known as the principal debtor, in favour of the creditor.