Guarantees given by spouses as security for bank debts: the importance of independent advice, its scope and limitations
In a previous article published in JIBLR, the operation of the special equity rule can be seen where a spouse, usually a wife, does not understand the nature and effect of the guarantee she was induced to sign by the husband whereupon the transaction may be set aside. This article looks at the importance of independent advice which is an educative process to assist the wife guarantor to make informed decisions in relation to whether to enter a contract of guarantee. It should, however, be pointed out that independent advice, which usually means legal advice, is limited in the kind of issues legal practitioners take into consideration, and it is sometimes doubtful if this enables guarantors to obtain the type of information and advice they need. This is certainly the case these days, as commercial transactions become more complicated and sophisticated, resulting in guarantors having to require even accounting or financial advice to reflect more comprehensively the effect of a guarantee transaction and the risks involved in entering into such a transaction.
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