Guarantees are often used for security alongside a contract, for example, personal guarantees may be given to lenders by company owners and performance guarantees given by parent companies. To enforce a guarantee you have to have all agreed material terms in writing and it must be signed by the guarantor.
In the past, the courts have been prepared to take evidence from the parties and elsewhere in order to decide the meaning of poorly worded guarantees. However, the High Court recently heard the case of Fairstate Ltd v General Enterprise & Management Ltd ("GEML"), in which a guarantee given by the owner of GEML for GEML's performance of a contract with Fairstate, was so poorly drafted that the court refused to correct it. The guarantee contained incomplete clauses, had numerous drafting errors and mis-described the guaranteed liabilities. It emerged during the case that the parties had tried to adapt a bank document intended for use as a third-party for a guarantee for a customer's debt!
The court ruled that although the guarantee was written and signed, it was so fundamentally flawed and unsuitable due to the deficient drafting that it could not be corrected or enforced by the court. If the court did intervene, it would have been creating the parties' contract for them and going against the requirements of an enforceable guarantee (see above), as it was argued that not all agreed material terms were contained within it.
Guarantees are important but complex documents, with any benefit of the doubt in their meaning being given to the guarantor. But the courts are now tiring of correcting lazy drafting, so recipients of guarantees will need to be even more careful than before.