That Guarantee You Got Is Worthless

You just closed a multi-million dollar deal and you’re ecstatic. After months of long nights negotiating the terms of the deal, you can finally celebrate. The documents are all signed, including a personal guarantee from the other party that they’ll pay you in 90 days.

So what could possibly go wrong? A lot.

A personal guarantee in Brazil is valid and enforceable but only if properly prepared and executed. This includes making sure that the proper parties sign it. And not just one of them; all of them.

As we’ve discussed before, Brazil has different matrimonial property regimes that determine how assets are managed both during and after marriage. For example, assets that are acquired after marriage under the comunhão de bens regime are the property of both spouses. Hence, no rights can be granted in such assets (whether by sale or otherwise) without their consent. This is why both spouses must sign the deed in Brazilian real estate transactions.

The same is true for a guarantee. A guarantee that lacks the signature of both spouses isn’t worth the paper it’s written on. It’s basically an empty promise that can’t be enforced under Brazilian law. And this is where everything goes wrong.

Ensuring that you’ve dotted your i’s and crossed your t’s is critical. Do your due diligence on the counterparty; rely on local counsel to advise you on the legal issues; and make sure you have the documentation you need. It’ll pay off in the long run - we guarantee it.