Surety / Personal guarantee
A guarantor accessory promise to perform a debtor obligation if the debtor fails to do so.
Definition
A surety (borgtocht) is a contract in which a guarantor undertakes to fulfil a debtor obligation towards a creditor if the debtor fails to perform. It is accessory to the principal debt, so the surety can invoke the debtor defences and is released if the main debt lapses. For a private individual standing surety outside the course of business, additional protective formalities and consent rules apply.
Example
A company director stands surety for a bank loan to the company, becoming personally liable if the company defaults.
Why this is a business risk
A surety exposes the guarantor to personal or group-level financial liability for obligations they do not directly control. The scope and duration of the surety commitment are frequently underestimated at the time of signing, particularly when the underlying obligation can grow or extend. For creditors, a surety is only as strong as the guarantor's balance sheet, which may deteriorate over the contract term.
How to manage it
- Define the maximum amount of the surety clearly; an unlimited surety is a significant risk and may be unenforceable in some circumstances.
- Specify the duration: does the surety terminate with the underlying contract, or does it continue for claims arising after termination?
- For a private individual surety, comply with the statutory formalities under BW 7:859, which require the surety to be established in writing and the amount to be stated in the guarantor's own hand.
- Obtain spousal or registered partner consent where required by law before accepting a personal surety from an individual.
- Monitor the financial health of the guarantor during the contract term and trigger a replacement security request if the guarantor's creditworthiness materially declines.
Legal references
Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.
Frequently asked questions
Common questions about this term.