Voluntary revocation of guarantees by the guarantor giving notice to the lender
Voluntary revocation of guarantees by the guarantor giving notice to the lender

The following Banking & Finance guidance note provides comprehensive and up to date legal information covering:

  • Voluntary revocation of guarantees by the guarantor giving notice to the lender
  • When might voluntary revocation by the guarantor be possible?
  • No contractual provisions on revocation in the guarantee
  • Divisible consideration
  • Indivisible consideration
  • Express notice provisions are contained in the guarantee
  • During the notice period
  • Guarantees which are payable on demand

Guarantees are often an important element of a financing transaction for lenders. They are a form of quasi-security, often taken in conjunction with a security package (see How guarantees are used in finance transactions and Using security and quasi-security together).

Guarantees are often required as part of a lender's credit committee approval. It is therefore important to understand in what circumstances a guarantor could be released or discharged from its liability under a guarantee.

This Practice Notes looks at when a guarantor can revoke its liability under a guarantee by giving notice to the lender and what the effect of the revocation is.

It is important to note that there are a number of other circumstances in which the liability of a guarantor will terminate. For example, the guarantee could terminate because:

  1. the guaranteed obligation is performed by the principal and the guarantee is discharged or the guarantor performs its obligations under the guarantee—for more information, see Practice Note: Discharging guarantees by repayment or performance and clawback considerations

  2. the parties agree to release the guarantor—for more information, see Practice Note: Releasing guarantors by agreement between the parties, and

  3. certain circumstances have arisen which result in the guarantor's liability under the guarantee being discharged, extinguished or reduced—for more information, see Practice Note: Guarantor protections and how to exclude them in guarantee documentation—waiver of defences clauses