Macquarie Bank v Thomas [2010] NSWSC 843

In this case there was a property development which went bad and the bank sued the guarantors. One of the guarantors sought to defend himself on the grounds that, although he signed the guarantee, because he got nothing out of doing so, there was inadequate “consideration” to form a binding contract.

In finding that there was adequate consideration the judge noted:

The terms of the guarantee leave no room for doubt that the guarantee was given in consideration for the provision by the lender to the borrower. In clause 15.4 the guarantor acknowledged incurring obligations and giving rights under the Agreement for valuable consideration received from the Lender. Although the clause does not itself describe the valuable consideration, the Recital records that at the request the guarantor the Lender agreed to provide the Facility to the Customer. The guarantor did not put that, contrary to the Recital, he made no request. He proffered no evidence to suggest otherwise.

The moral to this story is that greater safety can be obtained by asking the guarantor to sign a document in which he formally requests that the finance be provided.

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