Personal guarantees appearing in contracts

[rootsnall]

But has anyone any idea why it is happening?

I think that they are putting this in place to try and claw back money from the contractor that they lost in negotiations with the client. Losing the insurers from the equation means that they can squeeze the money more easily from the contractor without bothering to prove anything.

I bet they think that threatening a contractor with legal action will make them pay up (without expensive legal representation).

I think that it has everything to do with declining profits and nothing to do with failures of the contractor.

I would guess that an agency ( are SThree involved by any chance ? ) have employed some legal expertise to make their contracts cover their ar*es and they came up with this wheeze. Once one agency is trying it them I'm sure the others pick up on it. They may be reacting to some onerous terms the end client has forced on them. I used to just sign contracts that had obvious unenforceable garbage in them but when it starts moving into personal guarantees I wouldn't touch it with a barge pole.

[tractor]

....

An update to this chaps. Not an answer to the Why, but advice on what to do if something like this lands on your desk.

I've asked around and I've received this from a trustworthy source...



Actually maybe we ALL need to modify our indemnity clauses with this amendment.

I have only ever been offered this 'opportunity' once. I did as you suggest, the agency removed the clause. I did go one further though and added a clause where they would be liable in the reverse event of them costing my company revenue

I suspect that this trend, if it is indeed becoming a trend is because agents in reality have an extremely low chance of recovering anything via your insurance company. No contractor is ever going to say 'I was out of my depth, it was my fault'

Most agents can't even navigate a cv without an explanation of every single acronym, how would they fare in this type of negotiation with an insurance company, especially given the level of generic job description they blindly regurgitate day in, day out.

This is just an attempt to avoid proceedings and give them an easy way out if either the client comes calling after the event or more likely, if you leave early and cost them some profit.

I do hope the PCG is lobbying REC on this point. Lot of good it will do though, I suspect.

[centurian]

They want a personal guarantee - contract me as a sole trader then... and I would happily do that.

If they insist on contracting me via a Ltd, then I insist on having the protections that such a structure provides - simples...

What do they think the Limited of a "private limited company" actually means then...


Also remember that this clause can be exercised in any contractural dispute, not just something which would otherwise be covered by your liability insurance, which is more limited in scope.

[norrahe]

My current agent tried that on me and I basically told then that I would not sign a contract ( this was actually a separate document) that held me personally responsible as an individual and that this was a B2B contract.

Told them they could shove their contract if they tried to force me to sign it, that also my business insurances were more than enough to cover any instance of liability.

cheeky feckers!

[SueEllen]

So how many instances of this have you all heard of?

And how many of these contractors have lost the contract by refusing the clause?

I can't see QDOS or B&C letting this through a review and giving the agent a kicking in the process.

Fuss about nothing, or do we think this is a genuine concern?

I've had 2 contracts where the agent tried to put that in. The first removed it without a fuss once I showed them a copy of my insurance certificate but the second was a f****** nightmare.

They did alter it in the end but I did say the personal liability was useless as they didn't know if I had any assets (some contractors don't and their reasons are legit), could easily flee abroad or declare myself bankrupt. If the money the agent wants back is more than a couple of months of involved if anything goes wrong they are better of ensuring that the contractor has PI otherwise they aren't going to see any money.

[deckster]

This isn't just a recent thing, either. My first ever contract, in 1999, had a personal liability clause. The agency removed it without a murmur, but I was rather surprised and concerned that it was there in the first place.

[jmo21]

So how many instances of this have you all heard of?

And how many of these contractors have lost the contract by refusing the clause?

I can't see QDOS or B&C letting this through a review and giving the agent a kicking in the process.

Fuss about nothing, or do we think this is a genuine concern?

[Wanderer]

Or they might be too pigtulip thick to realise that contractors can get this kind of insurance?

I'm not sure I'd want to do business with them if this was the case...

Depending on the terms and conditions of the insurance policy they may wriggle out of paying a claim. In this case they would come after the contractor's company which would have no assets. So now they ask the contractor for a personal guarantee.

Don't get me wrong - these guarantees are not at all uncommon in the business world (eg, to guarantee loan to a business) but people must think very carefully before they agree to them.

Giving a personal guarantee to underwrite an unlimited amount of risk is quite another matter though...

[cojak]

Probably they are trying to offset business risk onto contractors if the client reneges on something.

PPI only covers if the CONTRACTOR is at fault, not if the agent or client is a scumbag.

By George I think I've got it.

EVERYBODY NEEDS THE ABOVE CLAUSE IN THEIR CONTRACTS!

The bunch of lily-livered tulipes!

[cojak]

An update to this chaps. Not an answer to the Why, but advice on what to do if something like this lands on your desk.

I've asked around and I've received this from a trustworthy source...

......that any clause added which asks them to indemnify the agency against something over which they have no control will be legally unenforceable - advise them to amend the indemnity clause - "xyz Ltd will indemnify agency x against any loss agency x may suffer save for any act or omission by agency x or it clients "

Actually maybe we ALL need to modify our indemnity clauses with this amendment.

[cojak]

Or they might be too pigtulip thick to realise that contractors can get this kind of insurance?

I'm not sure I'd want to do business with them if this was the case...

[cojak]

But has anyone any idea why it is happening?

I think that they are putting this in place to try and claw back money from the contractor that they lost in negotiations with the client. Losing the insurers from the equation means that they can squeeze the money more easily from the contractor without bothering to prove anything.

I bet they think that threatening a contractor with legal action will make them pay up (without expensive legal representation).

I think that it has everything to do with declining profits and nothing to do with failures of the contractor.

[speling bee]

We should be insisting on personal gurantees from agency directors in case of agency bankruptcy / inability to pay.

[Wanderer]

agents are beginning to ask contractors to underwrite a personal guarantee against the actions of their LTD company.

It's an insidious thing and extremely dangerous. If you sign one of these guarantees then they could literally take you for everything you own and bankrupt you.

Agencies also have a habit of handing over a 25 page contract to sign at the 11th hour hoping that the contractor will just sign their life away.

We need to fight back against this. Start by naming the agencies which are trying this trick so we can put pressure on them from the outset.

[cojak]

As Wanderer has mentioned in a previous thread, agents are beginning to ask contractors to underwrite a personal guarantee against the actions of their LTD company.

It wasn't so long ago that in my RL experience I was the exception to even HAVE Professional Liability Insurance.

So why are they trying to get around professional due diligence with this guff? I would expect my insurance to pay up if I was indeed liable.

Or do they NOT want to bother with professional insurers in a case like that? Maybe they want to take your house without the mess of standing up and proving negligence to someone who knows a scam when they see one?