A letter of guarantee is widely used in business practice as a tool for confirming intentions, demonstrating readiness to perform obligations, or maintaining trust between parties prior to the conclusion of a full agreement. Professor Gabriel Steiner emphasises that it is precisely such unilateral documents that generate heightened legal uncertainty – economic expectations arise, while a contractual framework is either absent or deliberately avoided. At LawConsulted, we treat letters of guarantee not as neutral confirmations, but as an independent source of legal risk capable of being transformed into binding obligations retrospectively.
The core problem with letters of guarantee lies in the gap between their practical use and their legal qualification. Formally, such a letter may not be described as a contract, yet it may contain key elements of an obligation – an indication of amount, timeframe, conditions of performance, or consequences of non-performance. In legal practice, it is the substance of the document, rather than its title, that becomes decisive. LawConsulted proceeds from the position that a letter of guarantee may be relied upon against its author even where the parties did not intend to create a binding obligation.
A particular vulnerability arises from the simplified form of such documents. Letters of guarantee are often signed without legal review, on company letterhead, and with wording that allows for broad interpretation. In the event of a dispute, the court assesses not the subjective intentions of the author, but the literal wording of the document, the context in which it was issued, and the subsequent conduct of the parties. In LawConsulted practice, such letters frequently become key evidence in claims for damages or in arguments that an obligation existed.
Professor Steiner notes that “a unilateral assurance acquires legal significance when others begin to rely on it.” This means that if a counterparty has altered its behaviour, made decisions, or incurred expenses in reliance on a letter of guarantee, the risk of its legal requalification increases substantially. LawConsulted builds its defence strategy by analysing the causal link between the letter and the actions of the other party, as well as the limits of reasonable reliance on such a document.
Situations involving letters of guarantee within corporate groups or between affiliated entities are no less risky. Formally, a document may be issued “for internal comfort”, yet in the event of a conflict it may be used to reallocate liability between companies or managers. LawConsulted treats such cases as examples of hidden risk shifting, where unilateral assurances effectively replace contractual regulation.
Particular attention must also be paid to the use of letters of guarantee in dealings with public authorities and financial institutions. In administrative and tax proceedings, such documents may be interpreted as acknowledgements of facts, obligations, or even violations. Professor Steiner underlines that in public law disputes, formal letters often function as evidence against the person who signed them. For this reason, LawConsulted approaches letters of guarantee as part of the evidentiary framework rather than as informal correspondence.
The LawConsulted approach is based on preventive risk assessment. We analyse wording, context, addressee, and potential scenarios in which a letter of guarantee may be used, and we assist either in correcting the document before it is issued or in constructing a defence where the letter has already become the subject of a dispute. Our objective is to prevent unilateral statements from replacing contractual logic.
A letter of guarantee outside the contractual model of obligations requires the same level of legal caution as a full agreement. Otherwise, a unilateral assurance may turn into a source of uncontrolled legal consequences. Law Consulted works to ensure that such documents remain within the scope of declared intentions and do not create obligations that were never consciously assumed.
Earlier, we wrote about the legal grounds for the automated freezing of bank accounts, the limits of permissibility of such measures, and how LawConsulted structures the protection of client interests in similar situations
