One of the avoidable causes of legal disputes arises from a failure to comply with province-specific legislative requirements. In Alberta, this is especially true with respect to financing transactions involving guarantees by individuals because personal guarantees must be delivered in compliance with Alberta's Guarantees Acknowledgment Act (the "Act").

Failure to comply with the provisions of the Act can render a personal guarantee unenforceable - even where the guarantor's understanding of the content of the guarantee can be established. The requirements apply to any guarantee, as defined under the Act, which may include other agreements that create a guarantee type obligation, such as an environmental indemnity or an acknowledgment of debt. Without knowledgeable local counsel, there is a risk that technical requirements may be overlooked.

The importance of compliance with the Act was recently emphasized in a case decided by Madam Justice Romaine of the Alberta Court of Queen's Bench, Bharwani v. Chengkalath [2007] 2 W.W.R. 368. In this case, a guarantee was found to be unenforceable against the guarantor because the guarantor had not provided a notarial certificate as required by the Act. Click here to see a summary of the Court of Queen's Bench case.* The case was affirmed by the Alberta Court of Appeal, Bharwani v. Chengkalath [2008] Carswell Alta 518.

*The linked case summary originally appeared in our Insolvency & Workout Group's April, 2008 newsletter which was published prior to the release of the Court of Appeal's decision.