Wragge Lawrence Graham & Co

UK 200 2013 position: 25

Finance litigation briefing — May 2014: capacity to enter into guarantee

By Greg Standing

Unless it would be obviously apparent that a guarantor lacked mental capacity when entering into a guarantee, the guarantee is binding.

In Josife (by his authorised representative) v Summertrot Holdings Ltd, Josife had suffered a stroke and had entered into an enduring power of attorney in 2004. His son was a debtor of the defendant and his wife had guaranteed the son’s debt. The son defaulted and the defendant issued bankruptcy petitions against Josife’s son and wife.

In consideration of the defendant withdrawing those petitions and allowing the son further time to pay his debts, in 2006 Josife entered into a guarantee with the defendant under which he assumed the obligations of primary obligor…

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