In a recent judgment, the court decided that an assurance by the director of a company that he would pay the fees it owed was not a guarantee of those fees. This was in spite of a letter he signed at the same time, which included a term stating that the directors would be directly liable where the company failed to pay.
Even if the assurance had been a guarantee, a formal guarantee made later by the same director for the fees outstanding at that time had superseded it, because the deed included a clause stating that it superseded any previous agreement relating to its subject matter (an "Entire Agreement" clause).
For a guarantee to be enforced, it must be given or evidenced in writing, and signed by the guarantor.
In this case, the director signed a letter accepting the terms of business of his company’s solicitors. One of the terms stated that the directors would be directly liable where the company failed to pay. At the same time, the director made comments along the lines of "you don’t have to worry, I will be paying your fees".
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 02/01/2007.
