Independent Legal Advice for Guarantors

Independent Legal Advice for Guarantors in Sydney

Independent legal advice for guarantors is a private meeting with your own lawyer, before you sign, in which the guarantee and any mortgage are explained to you so that you understand exactly what you could lose. Lenders usually require it, and a solicitor's certificate confirming it was given, before the loan settles. Invictus Legal provides independent legal advice in Sydney, in person or by video, often with the certificate issued the same day.

Reviewed by Sam Saadat, Principal Lawyer, Invictus Legal. Last reviewed: 7 October 2026

Why does the lender want me to get independent legal advice in Sydney?

Lenders require independent legal advice because a guarantee given without understanding it is more likely to be challenged and set aside.

Courts can refuse to enforce a guarantee where the guarantor did not understand the transaction and the lender did nothing to have it explained. A solicitor's certificate is the lender's evidence that someone independent explained the documents to you. That protects the lender, but it is also your one real opportunity to understand the risk and decide whether to sign at all.

Who does the solicitor act for?

The solicitor giving independent legal advice acts only for you, the guarantor, not for the lender or the borrower.

That means we cannot also act for the borrower in the same transaction, and we will not discuss your instructions with the borrower or lender without your consent. We will ask that the borrower not be present during the advice, so that you can ask questions freely and decide for yourself.

What will the solicitor explain before I sign a guarantee?

We explain what you are promising, how much you could be liable for, what property is at risk, and what happens if the borrower defaults.

• Nature of the guarantee: you promise to pay the borrower's debt if the borrower does not. A guarantee is often combined with an indemnity, which can make you liable even if the borrower's own obligation fails.

• Extent of liability: whether your liability is unlimited or limited to a fixed amount or to the value of particular property.

• All-moneys clauses: whether you are guaranteeing only this loan, or every amount the borrower owes or later owes the lender, including future increases and new facilities.

• Security over your home: if you also give a mortgage, the lender can sell your property, including the family home, if the debt is not paid.

• Consequences of default: demands, interest, enforcement costs, legal proceedings and, ultimately, bankruptcy.

• Your options: you can refuse to sign, ask for a limit, or ask for more information about the borrower and the loan.

Will the solicitor look at my own circumstances?

Yes. Good independent advice is about your position, not just the documents.

We ask about your income and assets and whether you could meet a demand if one were made; your relationship with the borrower and whether you will receive any benefit from the loan; and whether you feel any pressure, time pressure or expectation to sign. If we are not satisfied that you understand the transaction and are signing freely, we will not give the certificate.

What legal protections do guarantors have?

A guarantee can be set aside or varied in some cases, including for unconscionable dealing, under the principle in Garcia, and under the Contracts Review Act 1980 (NSW).

Unconscionable dealing

In Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, the High Court explained that equity intervenes where one party unconscientiously takes advantage of another's special disadvantage. As the High Court later described it, parents had entered into a mortgage and guarantee affected by their son's misconduct, and the bank's employee had shut his eyes to their vulnerability.

The Garcia principle

In Garcia v National Australia Bank Ltd [1998] HCA 48, the High Court held it would be unconscionable for a lender to enforce a wife's guarantee where she did not understand the transaction, obtained no gain from it, the lender is taken to have understood she may rely on her husband to explain it, and the lender took no steps itself to explain it or to find out that a stranger had explained it. The Court left open whether the principle extends to other long-term relationships.

Contracts Review Act 1980 (NSW)

A court may grant relief where a contract was unjust in the circumstances when it was made (s 7). Relevant matters include inequality of bargaining power and whether and when independent legal or other expert advice was obtained (s 9(2)). Relief is not available to corporations (s 6(1)) or for contracts entered into in the course of a person's trade, business or profession (s 6(2)), subject to a farming exception.

National Credit Code and the Banking Code of Practice

If the guaranteed loan is regulated by the National Credit Code (Schedule 1 to the National Consumer Credit Protection Act 2009 (Cth)), Part 3 Division 2 (ss 54 to 62) deals with guarantees, including the form of the guarantee, disclosure, copies of documents for the guarantor, the guarantor's right to withdraw before credit is provided, and limits on the guarantor's liability. For bank loans covered by the 2025 Banking Code of Practice, the bank must include a prominent notice that you should seek independent legal and financial advice, that you can refuse to sign, and that you can limit your liability (para 103). The bank generally will not accept your guarantee until the third day after giving you the required information, unless you or your lawyer confirm you have received independent legal advice (paras 112 and 113).

How quickly can I get independent legal advice and a certificate?

We can usually see you quickly, in person at our Marrickville office or by video, and in many cases issue the certificate the same day.

Bring photo identification and the full set of loan, guarantee and mortgage documents. If the lender has sent its own certificate form, bring that too. Disputes about guarantees are heard in the Local Court, District Court and Supreme Court of NSW, and Invictus Legal appears in courts across Sydney and NSW.

What does it cost?

Cost depends on the number of guarantors, the complexity of the documents, and whether the matter also involves a mortgage over your property. Fees for commercial matters are determined by the scope of work involved, and we issue a costs agreement before we commence any work, so you have full transparency from the start. Sometimes the borrower pays our fee, but we act only for you.

Frequently asked questions

Can the borrower's lawyer give me independent legal advice?

No. Independent legal advice must come from a lawyer acting only for you, the guarantor. The borrower's lawyer has a conflict because their client wants the loan to proceed.

Can I withdraw after signing a guarantee?

For a guarantee of a loan regulated by the National Credit Code, s 58 of the Code allows a guarantor to withdraw before credit is provided under the guaranteed contract. Bank guarantees under the 2025 Banking Code of Practice have similar protections. Once the money is advanced, withdrawing is generally much harder, so get advice before you sign.

Can I limit how much I guarantee?

Often, yes. You can ask the lender to cap the guarantee at a fixed amount or the value of particular property. For bank loans covered by the Banking Code of Practice, the guarantee must be limited to a specific amount or category of amounts, or to the value of specified security.

Does the Contracts Review Act protect a company director who guarantees a company loan?

Often not. The Contracts Review Act 1980 (NSW) does not give relief for contracts entered into in the course of or for the purpose of a trade, business or profession carried on by the person (s 6(2)), so a director guaranteeing their own business's debts may be excluded. Each case depends on its facts.

Do I need a separate lawyer from my spouse if we are both guarantors?

Lenders often require each guarantor to get separate independent advice, and it is usually wise. Your interests may differ, and the Garcia decision shows the risks when one spouse relies on the other to explain the transaction.

Book independent legal advice in Sydney

Call Invictus Legal on 02 8553 0500, or book online. If you are the lender or borrower, see our loan agreements, guarantees and security page, or view all our commercial law services.

This page is general information only and is not legal advice. Contact Invictus Legal to discuss your situation.