In Signature Living Hotel Ltd v Sulyok  EWHC 257 (Ch), the High Court was asked to consider whether two deeds of guarantee were enforceable in circumstances where the signature of the director of the surety had not been attested by a witness, in accordance with the requirements of section 44(2)(b) of the Companies Act 2006.
The surety submitted that as the guarantees were not properly executed, they were invalid as deeds and therefore incapable of enforcement. In addition, anticipating arguments the lenders would raise, the surety also submitted the guarantees were unenforceable as simple contracts because the parties had not intended to enter into such contracts.
In response, the lenders contended that whilst the lack of attestation prevented the guarantees taking effect as deeds, they were nonetheless enforceable as a matter of contract. Under section 43(1)(b) of the Companies Act 2006, all that is required for a contract to be valid is for it to made by a person acting under the Company’s authority. It was clear on the facts that the executing director was so authorised. Therefore, the lender submitted the two guarantees could stand as simple contracts and they were sufficiently supported by consideration to be enforceable as such.
The Court held that whilst the two guarantees were invalid as deeds, they were enforceable as contracts and they were sufficiently supported by consideration. The Court was entirely satisfied that the law is as stated in the 7th (2015) edition of Andrews and Millet: The Law of Guarantees – “..if an otherwise complete contract of guarantee is intended to be embodied in a deed but the formalities have not been complied with, the creditor can still enforce the agreement.” That proposition is, of course, correct but only where the other essentials of the contract are present, including the crucial element of consideration.