Builders Merchant’s Trade Personal Guarantees
are not what they were

Trade supplier Personal Guarantees are often used in the UK by suppliers (in particular builders merchants) in order to have a director support the debt of a company in the event that the company defaults on payment to that supplier.

For decades the reference to this alleged Personal Guarantee would often be hidden, in tiny print on a credit application form, so that many an unwitting person would sign the document believing themselves to be signing a credit application form only to find, some time later, that the supplier would be chasing them personally for the debt of the company.

And often those trade suppliers would win court proceedings, as people argued all the wrong points of contention. Thankfully for our clients, where these defective documents were used, the matter was always settled favourably as we were able to argue the correct points and negotiate a settlement on the weakness of those documents that effectively concealed the Personal Guarantee or used wording that was too ambiguous.

BUT TIMES HAVE CHANGED as the builder merchants industry have, for the most part, got their act together over the last few years and, in certain cases, adopted better practices than before. In particular many of them now have two signature boxes; one signing on behalf of the company with respect to a credit application form and the other a Personal Guarantee signed by an individual.

Signing in two very separate places heavily favours the trade suppliers with respect to such an agreement. A general view taken by the judiciary is that a Director should take all due care when putting his signature to any documents and if he or she does not then they put themselves at risk. This makes it all the more difficult as the informal environment in which these documents are often signed is at a builders merchant’s trade counter.

All is not lost as some issues do still arise. Often the person signing the Personal Guarantee box may not be a Director of the company and so can not be held liable; some of the wording used by some of the trade suppliers is still open to conjecture, an old style form has been used and, on reviewing the documentation supporting the alleged balance, there are issues surrounding the pricing or purchase authorisation of such items, or the trade suppliers attempt to include further unenforceable costs and interest.

Finally, many of the builders merchants use one firm of solicitors, which generally does allow us to come to a fair and equitable solution, although major organisations use internal resources that often seem more intent on bankruptcy than getting repaid and these have to be dealt with effectively. There is a stand alone firm of solicitors working for one particular building supplier who flouts court and regulatory provisions for their own ends but thankfully, as we deal with so many cases, we are able to identify such behaviour on behalf of our clients so they can take the appropriate action.

28 March By Mel Loades


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