We have added links to new standard form Sharia compliant guarantees and an accompanying practice note.
Accessing Practical Law Finance's guarantees resources
A guide to Practical Law Finance's resources on guarantees, including key practice notes and a list of standard form guarantees and indemnities relating to different types of transactions.
This note acts as a guide to Practical Law Finance's resources on guarantees.
Overview of the law on guarantees and indemnities
Quick guide, Guarantees and indemnities ( www.practicallaw.com/7-523-6570) , provides a brief introduction to guarantees and indemnities, highlighting the key issues.
Practice note, Guarantees and indemnities ( www.practicallaw.com/9-200-1437) , contains a fuller examination of legal and drafting issues relating to guarantees and indemnities, including the legal distinctions between primary obligations (indemnities, demand guarantees ( www.practicallaw.com/6-502-0561) ) and secondary obligations (guarantees), contractual issues (the statute of frauds, capacity, undue influence, duress), and common clauses in guarantees and indemnities.
Practice note, Bonds, guarantees and standby credits: overview ( www.practicallaw.com/4-107-3649) , provides an overview of demand guarantees (also called on demand bonds), guarantees and standby credits, and the differences between them, in the context of commercial contracts (as distinct from guarantees of the repayment of loans or other indebtedness).
Variation of guaranteed obligations
Practice note, Variation of guaranteed obligations ( www.practicallaw.com/7-228-2952) , examines the extent to which an underlying contract, which is the subject of a guarantee, can be amended or varied without that variation of contract discharging the guarantee and releasing the guarantor from its liability.
Termination and discharge
When and how a guarantee can be terminated, and the effect of termination.
What happens to a guarantee if the guarantor dies or becomes mentally incapable.
How a guarantee is discharged.
The circumstances in which a guarantee may be set aside (undue influence, misrepresentation, breach of contract, duty to disclose and loss of security).
The application of these principles to indemnities.
Practice note, Enforcing guarantees: guarantor's rights ( www.practicallaw.com/5-562-6805) , looks at a guarantor's rights when a guarantee is being enforced including rights against the lender, co-guarantors and borrower. The note also considers subrogation, hotchpot and marshalling.
Practice note, Enforcing guarantees: Conclusive evidence clauses ( www.practicallaw.com/8-594-8965) considers the court's approach to conclusive evidence clauses, the impact such clauses have on guarantees, how to challenge a conclusive evidence clause and steps you can take to protect your conclusive evidence clause against a challenge by a guarantor.
Toolkit, Enforcing guarantees ( www.practicallaw.com/1-580-0745) provides an overview of key Practical Law content relevant to enforcing guarantees.
Practice note, Corporate insolvency and guarantees: overview ( www.practicallaw.com/6-519-7404) , considers the impact of corporate insolvency on guarantees.
Practice note, How to insolvency proof your guarantee ( www.practicallaw.com/9-619-9288) , a guide to drafting and negotiating some of the clauses that are most significant when protecting a beneficiary or a guarantor from the effects of the primary obligor or the guarantor (or both) becoming insolvent.
Standard documents and clauses
Below is a list of our standard form guarantees and indemnities. They are categorised by the type of transactions they relate to or are most commonly associated with.
Where a standard document or clause does not have integrated drafting notes, a link to the stand-alone drafting notes will appear at the top of the page.
For a list of standard form guarantees available from Practical Law practice areas other than Finance, see Standard documents and clauses from other practice areas.
Corporate guarantees and indemnities
Personal guarantees and indemnities
For guidance on taking a guarantee from an individual, see Practice note, Practical guidance from the House of Lords for banks and solicitors dealing with guarantees and security by individuals ( www.practicallaw.com/6-107-3969) .
Automated FastDraft version
Guarantee and indemnity - automated FastDraft version ( www.practicallaw.com/0-506-7472) incorporates questions which allow you to quickly choose between the different types of guarantee (e.g. between an all monies guarantee or specific liabilities, and between a corporate or individual guarantor). It also allows you to import details of the parties from Companies House and make online changes to other aspects of the document.
ABI model form of guarantee bond ( www.practicallaw.com/0-107-3651) . A form of guarantee bond published by the Association of British Insurers, which has also been adopted by the National Joint Consultative Committee for Building.
Bond: default performance bond for a construction project ( www.practicallaw.com/9-381-0856) . A default performance bond to be given by a contractor's bondsman or other surety. The bond may be adapted for use with any form of building or engineering contract, but uses terminology consistent with a JCT building contract.
Advance payment bond ( www.practicallaw.com/7-518-6787) . An on demand advance payment bond (also called an advance payment guarantee) involving an independent payment obligation, to be issued in letter form, typically by a bank. The bond is primarily intended for use on a construction and engineering project, although it could be used or adapted for other commercial supply contracts, including where a customer pays a supplier in advance for a piece of machinery or equipment.
On demand bid bond ( www.practicallaw.com/1-518-5984) . An on demand bid bond (also called a tender bond or tender guarantee) involving an independent payment obligation, to be issued in letter form, typically by a bank. The bond is primarily intended for use on a construction and engineering project, although bid bonds are rare in the UK construction market.
On demand performance bond ( www.practicallaw.com/8-107-3652) . An on demand performance bond (also called a performance guarantee) involving an independent payment obligation, to be issued in letter form, typically by a bank.
For a note on the Uniform Rules for Demand Guarantees ( www.practicallaw.com/6-502-0542) (URDG), a set of contractual rules published by the International Chamber of Commerce, see Practice note, URDG 758 ( www.practicallaw.com/6-502-0655) .
Sharia compliant guarantees
Practice note, Sharia Compliant Guarantees ( www.practicallaw.com/3-592-8106) provides guidance on the law and Sharia issues relating to the above guarantees.
The following chapters of Bloomsbury Professional books online discuss various issues in relation to guarantees:
Finance globall guide: Country Q&A tool: Guarantees ( www.practicallaw.com/2-500-7830) , provides information on the creation of guarantees in different jurisdictions.
Links to Practical Law resources on guarantees
Practical Law Finance resources on guarantees
Links to Practical Law Finance resources on guarantees:
Standard documents and clauses from other practice areas
Asset and share purchase agreements
The following standard documents and clauses have been published by Practical Law Corporate:
The following standard documents and clauses have been published by Practical Law Commercial and Practical Law IPIT & Communications:
Guarantee and indemnity: payment obligation ( www.practicallaw.com/9-211-3048) . A guarantee and indemnity clause that can be inserted into a commercial agreement in respect of a party's payment obligations. This standard clause is available to Practical Law Finance subscribers.
Indemnity ( www.practicallaw.com/1-107-3797) . A boilerplate clause giving a specimen indemnity provision for use in a commercial contract.
Performance guarantee ( www.practicallaw.com/9-379-7077) . A deed guaranteeing the performance of a party's obligations under a commercial agreement.
Parent company guarantee (outsourcing) ( www.practicallaw.com/3-203-0923) . A parent company guarantee guaranteeing the obligations of a supplier providing services under an outsourcing agreement.
Construction contracts: parent company guarantees
The following standard documents have been published by Practical Law Construction:
Parent company guarantee from contractor's parent company ( www.practicallaw.com/0-383-4705) . A parent company guarantee to be provided by a contractor's parent company in connection with the contractor's obligations under a building or engineering contract.
Parent company guarantee from employer's parent company ( www.practicallaw.com/1-383-4677) . A parent company guarantee to be provided by an employer's parent company in connection with payments under a building or engineering contract.
Real estate transactions
The following standard documents and clauses have been published by Practical Law Property:
Authorised guarantee agreement ( www.practicallaw.com/0-200-2002) . A standalone authorised guarantee agreement for use with a lease which is a new lease under the Landlord and Tenant (Covenants) Act 1995 ( www.practicallaw.com/7-506-6087) .
Guarantee in sale contract ( www.practicallaw.com/0-101-5618) . A guarantee clause for use in a property sale contract, whether of freehold or leasehold land, where the seller requires the buyer's contractual obligations to be guaranteed.
For issues that need to be considered when drafting guarantee and indemnity clauses in commercial leases, see the following Practical Law Property practice notes:
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