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NSW B2B Service Contract - Must Give I Personal Guarantee?

Discussion in 'Commercial Law Forum' started by digital-c, 21 April 2015.

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  1. digital-c

    digital-c Member

    21 April 2015
    Likes Received:
    My Pty Ltd company has just won business with a new client to build a new IT project as well as a managed service contract.

    Recently, the CEO of the client has experienced an issue with an old supplier whereby they went bankrupt and the client lost their spendings along with not having the project completed.

    In a separate matter, they have had problems with the supplier we are replacing.

    The Issue / My Question:
    Understandably, said client is currently somewhat cautious with new agreements. In our case, it seems we are paying for the poor actions and bankruptcy of others.

    The client is drafting through their legal representation an agreement which to my understanding is asking for myself (MD of my Company) to provide a personal guarantee in the event of issues similar to above.

    I have fully complemented PI and Public liability Insurance for our line of work (far exceeding tbh, and covering consultancy as well). My business is structured in such a way as to minimise risk by utilising a trust and company structure.

    1. Is it legal for another business to request a personal guarantee / waiving of rights in the event of mishap, non-delivery, financial etc. for a B2B contract?

    2. Is this not what my business insurance is for?

    3. Is this a standard practice in some cases?

    I'm extremely concerned by this. I have no issue standing behind our service delivery and the piece of work is completely routine for us.
  2. Rod

    Rod Well-Known Member

    27 May 2014
    Likes Received:
    1. Not a legal expert on personal guarantees so can't say.
    2. Supposedly
    3. Not that I've ever seen in IT contracts. Suspect they'll have a hard time finding anyone in Australia will give a personal guarantee of this nature. Though they might find some Indians willing to give guarantees, and sell their wives :)

    Standard business practice in this kind of contract is to insist on PI insurance and actually view/get copy of the Insurance policy.

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