Question

As a result of past unethical behaviour, financial institutions asking for guarantees must now obtain certificate that the guarantor has accessed independent legal advice. Why is this necessary?

Answer 1

When some one gives guarantee for other's liability, then he will be responsible for the payments if the party for whom he has given guarantee , defaults. Historically many guarantors did not understand the risk they were undertaking while providing guarantee, due to which they had to suffer heavy losses even in some cases they had lost thier home. Hence beforegivin guarantee, one have to access the risk involved. Thus requirement of certificate have been brought in.

Thus to protect interest of guarantor , it is necessary that the guarantor has accessed independent legal advice.