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05 February 2009
Issue: 7355 / Categories: Opinion , Company , Banking , Commercial
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Banking on UCTA

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Christopher Coffin & Sarah Quilliam look for guarantees in commercial contracts

Barclays Bank plc v Alfons Kufner [2008] EWHC 2319, [2008] All ER (D) 102 (Oct) establishes that the Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083) do, contrary to previous authority, apply to a guarantee—however it restricts the circumstances in which a guarantor will have their protection. As a result, the claimant bank was able to rely on a term excluding its equitable duty not to impair or release securities. The decision also extends the reflective loss principle so that loss suffered by a guarantor, if also a shareholder, is not separate and distinct from the company’s loss.

Factual background
Barclays Bank plc (the bank) made a loan to an Isle of Man company, Kel, owned and controlled by Mr Kufner (AK). AK is a German national with a background in the manufacture of car parts. The loan was to enable Kel to purchase a yacht and was secured by a personal guarantee from AK and a mortgage on the yacht. The yacht

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