What Happens When There Are Multiple Guarantors for a Single Obligation?

Why This Matters: Clearing Up That Nagging Confusion

Ever been in a situation where a big business deal is on the line, and suddenly someone says, “Let’s add another guarantor, just in case”? That’s when things get tricky. If several people are backing the same debt or contract—do they all owe the same, can the creditor chase any one of them for the whole amount, or do they split the obligation? These questions pop up everywhere: from multinational trade to small rental agreements. I’ve dealt with this, and if you haven’t yet, you probably will.

The Core Principle: Joint, Several, or Joint and Several

First, let’s clear up the legal backbone. There are three main ways multiple guarantors can be held liable, and contracts don’t always make it obvious which one applies:

• Joint Liability: All guarantors are responsible together, but only as a group. If one can’t pay, the others must make up the difference.
• Several (or “severally” in legalese): Each guarantor is only responsible for their stated share or portion, never for the others’ failures.
• Joint and Several Liability: This is the catch-all, wild west version. The creditor can pick any one or more of the guarantors for the whole amount, then it’s up to them to sort it out amongst themselves later.

Which applies? It depends on what’s in the contract and, if it’s unclear, what the law says in the relevant country. Courts often presume joint and several liability unless stated otherwise. Reference: Practical Law - Guarantors: Liability.

Personal Walkthrough: Setting Up Multiple Guarantors (Muddling Through, Mistakes and All)

Let me walk you through a real workflow from my own archive. We had a logistics contract between a tech importer and a shipping line. The importer’s bank wanted extra security, so the CEO and CFO were both added as guarantors.

1. Drafting the Guarantee (or, How We Got Confused)

Here's where I tripped up the first time: we just wrote “the Guarantors jointly guarantee the obligations of the Buyer.” Thought that was enough. Later, a lawyer flagged that if one left the company, the other could be chased for everything—a classic joint & several scenario.

See the scan of our annotated contract:

Source: In-house legal review (2023)

2. Negotiation: Dividing Risk (and Avoiding Office Drama)

We revised the clause to state: “Each Guarantor shall be liable to the extent of 50% of the guaranteed obligations.” This made it several. Creditors sometimes push back—they want maximum reach.

During negotiation, the counterparty’s lawyer said: “If you split responsibility, we need higher credit checks. We prefer joint and several, so we can chase the easy target.”

Industry data supports this: Association of British Insurers: Practice Guide on Guarantees, which notes most lenders insist on joint and several liability for enforceability.

3. Enforcement: What Happens in Real Life

We had a payment default—here’s the value of clear language. The creditor could only pursue each for their share. But I’ve seen other cases (once in a cross-border machinery import involving a German and a Singaporean company), where the lack of specificity led to months of finger-pointing and protracted litigation.

A comment thread on Reddit LegalAdvice includes a landlord who chased three student guarantors for a year; everyone blamed the others, and the landlord ended up settling for partial recovery.

Case Study: A Country-to-Country Dispute—Freedom of Contract Meets Local Law

Here’s a (simulated, but realistic) scenario:

• A-Trade Export Co. (UK) sells to B-Firm (France)
• B-Firm’s bank and a private investor both act as guarantors
• The contract says “Guarantors are jointly liable,” but French law prefers pursuing each in proportion to their involvement unless otherwise specified
• UK creditors, relying on standard EU contract principles (Rome I Regulation), argue they can chase either, while French courts push for a split recovery

It dragged on. Eventually, after referencing French Civil Code: Article 2288 (joint and several liability is not presumed), each guarantor only paid their portion.

An industry expert I interviewed, Lara J., a trade finance consultant, summed it up: “Unless you want a headache, clarify the guarantee’s scope and echo the local legal requirements!”

Country Comparison Table: “Verified Trade” Standards

Because guarantees often back international trade, whose standards differ wildly, here’s a snapshot of how various countries approach “verified trade” for guarantee enforcement, including liability splits, main laws and agencies.

Expert Insight and Final Takeaways

Having spoken to both contract lawyers and trade finance veterans, the unglamorous truth is: there’s no one-size-fits-all formula. “Guarantor” liability is as much about careful drafting as it is about local law.

In theory, all parties should be totally clear from day one. In practice, especially across borders (where wording gets awkward, or one legal system is more creditor-friendly), you can end up with endless disputes. For instance, OECD guidance recommends parties “explicitly state” if liability is joint, several, or joint & several, precisely because so many international claims founder on this point (OECD Export Credit Rules).

I’ve learned—often the hard way—to:

• Spell out exactly how the burden splits
• Check the background law before finalizing terms
• Assume ambiguity favors the creditor, unless you’re in a jurisdiction (like France) that protects guarantors

There was one case where we thought the risk was evenly shared, only to discover on default that the more liquid party got chased for the whole amount—lead to some awkward boardroom conversations.

Wrapping Up: Lessons From the Trenches

Finance and legal teams should never just “add more guarantors” to feel safer. You have to nail down how the obligation is split, check every relevant legal regime (especially in cross-border trades), and make sure everyone signing on knows exactly what's expected of them.

Next Step: For anyone drafting or reviewing a multi-guarantor deal, run both a legal and commercial check: Does the contract say exactly how the liability works? If in doubt, have a specialist review both the guarantee and the governing local laws. And double-read that fine print—your future self (and your company’s bank balance) will thank you.

Author: James Li (JD, International Commercial Law, University of London; 8+ years advising on multinational guarantee enforcement and trade finance)
References:

• Lexology: Multiple Guarantors – A Minefield
• UK Government: Trade Credit Insurance Guide