A guarantee is an undertaking by one person (the guarantor) to perform an obligation of another person (a borrower or other debtor), given in favour of the person to whom that obligation is owed (the beneficiary). A guarantee is what is known as a “secondary” obligation – this means that the guarantor is only liable if the borrower or debtor has failed to perform the “primary” obligation, which is the obligation of the borrower or debtor which has been guaranteed. In the context of a loan agreement, a guarantee is an undertaking from the guarantor to the lender that the borrower will perform the borrower’s obligations under the loan agreement, the most relevant obligation being to repay the loan and interest. If the borrower does not pay, the guarantor will perform the obligation itself and make the payment instead of the borrower.

Why are guarantees also given as indemnities?

Guarantees are almost always drafted both as a guarantee and as an indemnity. Unlike a guarantee, an indemnity is a “primary” obligation – it is an undertaking from one person (the guarantor) to pay the beneficiary if the beneficiary suffers loss as a consequence of a specified event. In the case of an indemnity which is part of a guarantee for a loan, the specified event is the non-payment of the loan or other breach of the loan agreement. As a primary obligation of the guarantor, the indemnity is independent of the obligations of the debtor or borrower. An indemnity should, unlike a guarantee, remain in effect should the underlying loan agreement or equivalent transaction be set aside or if the borrower is somehow discharged from its obligations under the loan agreement.

What are the formalities of a guarantee?

A guarantee must be in writing and signed by the guarantor (or the guarantor’s agent). It is usual also for a guarantee to be executed as a deed, to avoid an argument that it lacks contractual consideration.

Guarantee from a company (as opposed to an individual) for a corporate borrower’s obligations under a loan agreement. The guarantee is in the form of a standalone Deed of Guarantee between the guarantor and the lender Use this document: for a guarantee to be given by a company for the obligations of another company under a loan agreement for a guarantee in the form of a standalone Deed of Guarantee where both guarantor and borrower are incorporated in England and Wales Key features include: 14 clauses over 6 pages standalone deed of guarantee guarantee undertakings given by way of both guarantee and indemnity standard creditor protections for the continuing effect of the guarantee Alternative guarantees For a form of guarantee to be given by an individual (as opposed to a company), see Guarantee: individual guarantor . For a guarantee clause to be included in a loan or other agreement, see Guarantee: contract clause . Add To Cart

Guarantee: corporate guarantor

Name: Guarantee: corporate guarantor - Paper Rock Docs
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Description

Guarantee from a company (as opposed to an individual) for a corporate borrower’s obligations under a loan agreement. The guarantee is in the form of a standalone Deed of Guarantee between the guarantor and the lender

Use this document:

for a guarantee to be given by a company for the obligations of another company under a loan agreement
for a guarantee in the form of a standalone Deed of Guarantee
where both guarantor and borrower are incorporated in England and Wales

Key features include:

14 clauses over 6 pages
standalone deed of guarantee
guarantee undertakings given by way of both guarantee and indemnity
standard creditor protections for the continuing effect of the guarantee

Alternative guarantees

For a form of guarantee to be given by an individual (as opposed to a company), see Guarantee: individual guarantor. For a guarantee clause to be included in a loan or other agreement, see Guarantee: contract clause.

Add To Cart

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Guarantee: corporate guarantor

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