No Risk, No Fun? Should Spouses Be Advised Before Committing to Guarantees? A Comparative Analysis

Abstract:     
This article deals with the question of whether a spouse who grants a security for the business debts of the other spouse can escape liability because he or she has not been properly advised by the creditor. After an introduction into this topic, I outline the legal position in English, Scots and German law. As for English and Scots Law, I focus on the decisions of the House of Lords in Barclays Bank plc. v. O'Brien and Smith v. Bank of Scotland, and, as for German law, I deal with the reasoning of a duty to advise and the decisions of the German Supreme Court (BGH). The second main part of this article compares and interprets the similarities and differences of these legal systems. In particular, I consider the practical results as well as the existing and lacking legal concepts of each legal system. In the final part I expound my own solution. It is discussed whether the principles of good faith and culpa in contrahendo are sound and whether a duty to advise keeps the balance between the interests of guarantors and creditors. As a result, it is submitted that the answer to these questions is in the affirmative.

Number of Pages in PDF File: 20

Keywords: Guarantees, contract law, comparative law, duty of advice, culpa in contrahendo

JEL Classification: K12

Accepted Paper Series