LLB202 Study Guide - Final Guide: Parol Evidence Rule, Miscarriage
1. FORMALITIES
Certain types of contracts must be in writing before they are binding to ensure there is no
doubt as to the intentions of the parties and the terms which make up the contract.
7.1 Contract to be made or evidenced in writing in QLD
7.1.1 Contracts of Guarantee
A contract of guarantee must be in writing and signed by the party to be charged in order to
be enforceable (Property Law Act 1974 (Qld) s56(1))
A guarantor's liability is ‘secondary’ – a contract of guarantee is ‘a contract to answer for the
debt, default or miscarriage of another who is to be primarily liable to the promisee’
Yeoman Credit v Latter [1981] 1 WLR 828,831.
In order to be a guarantee there must be two separate contracts:
1. the principle transaction between the lender and debtor
2. There is then a separate contract between the lendor and the guarantor
-This contract only arises if there is a valid contract between the lendor and guarantor
and there has been a fault under this contract. If the primary contract is not valid, the
guarantor will also not be liable.
The following are examples of when guarantees may be given –
-A loan to a person to buy a house for personal use, with a guarantee given by the
borrower’s parents – if the borrower defaults the creditor can look to the parents for
payment.
-A loan to a person to help establish that person in business, with a guarantee from the
borrower’s parents – if the borrower defaults the creditor can look to the parents for
payment.
-A loan to a company for business purposes, with a guarantee being obtained from the
directors of the company – if the company defaults the creditor can look to the
directors for payment.
The equivalent of section 56 in the original Statute of Frauds 1644 (UK) has been well
litigated over the years and due to the wording of the section a number of situations have
been found to fall outside its ambit – meaning that the relevant contracts are enforceable
despite being oral, and not made or evidenced in writing.
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Document Summary
Certain types of contracts must be in writing before they are binding to ensure there is no doubt as to the intentions of the parties and the terms which make up the contract. 7. 1 contract to be made or evidenced in writing in qld. A contract of guarantee must be in writing and signed by the party to be charged in order to be enforceable (property law act 1974 (qld) s56(1)) A guarantor"s liability is secondary" a contract of guarantee is a contract to answer for the debt, default or miscarriage of another who is to be primarily liable to the promisee". Yeoman credit v latter [1981] 1 wlr 828,831. In order to be a guarantee there must be two separate contracts: 1. the principle transaction between the lender and debtor: there is then a separate contract between the lendor and the guarantor.
