Corporate guarantees and sureties are often perceived as an auxiliary element of a transaction – a formal way to support the obligations of the principal debtor. However, Professor Gabriel Steiner says that these instruments are precisely where secondary liability most often arises – unexpectedly and at the most unfavourable moment. At LawConsulted, guarantees and sureties are treated not as technical add-ons to a contract, but as independent legal risks requiring separate and thorough assessment.
The key problem with corporate guarantees lies in their “deferred effect” – in ordinary business operations they remain invisible, yet once the principal debtor defaults, they immediately transform into a direct obligation of the guarantor or surety. At the same time, such documents are frequently drafted in broad terms – without clear limits on scope, duration, or grounds for liability. In LawConsulted practice, it is precisely this lack of precision that causes secondary liability to extend far beyond the risk originally anticipated.
Professor Steiner notes that “a guarantee becomes dangerous not when it is issued, but when it is interpreted.” Judicial and banking practice often resolves ambiguities against the guarantor, especially where the document is template-based or detached from the specifics of the transaction. LawConsulted therefore begins by analysing how a guarantee or surety may be construed in the event of a dispute – not how it appears at the moment of signing.
Particular vulnerability arises where corporate guarantees are issued within groups of companies, investment structures, or family businesses. Formally, the obligation is assumed by one legal entity, while the economic risk is effectively borne by another participant in the structure. LawConsulted identifies such shifts in responsibility – examining who actually controls performance, who derives economic benefit, and who ultimately bears the consequences if the guarantee is enforced.
Equally important is the issue of proportionality. Guarantees and sureties are often provided “just in case” – without a clear understanding of the maximum potential exposure. In Professor Steiner’s view, the absence of defined limits is what renders secondary liability practically unmanageable. LawConsulted structures legal positions so that obligations under guarantees are clearly restricted – by amount, duration, triggering events, and conditions for enforcement.
In protracted disputes, corporate guarantees are frequently used as a pressure tool – creditors may deliberately shift focus from the principal debtor to the guarantor, relying on the latter’s financial stability. LawConsulted addresses such scenarios systematically – demonstrating the accessory nature of the guarantee, identifying procedural defects in demand enforcement, and preventing expansive interpretations of liability.
The retrospective dimension is also critical. Guarantees and sureties are often assessed with the benefit of hindsight – in light of how the transaction ultimately unfolded. LawConsulted returns the legal assessment to the moment the decision was made – analysing the information available at the time, the purpose of issuing the guarantee, and the parties’ genuine expectations. This approach protects clients from the automatic imposition of liability that does not reflect the original logic of the transaction.
Legal assessment of corporate guarantees and sureties requires precision and discipline. Secondary liability should not become a concealed continuation of another party’s obligations. Law Consulted task is to ensure that such instruments remain manageable, transparent, and proportionate to the real level of risk – rather than a source of uncontrollable losses.
Earlier, we wrote about marriage as a legal structure and the LawConsulted approach to protecting the property and personal interests of spouses
