Short Form Limited Guarantee and Indemnity
This Short Form Limited Guarantee Agreementis a legally binding document that allows for one party to assume liability for the obligations of another under separate loan agreement. The parties to the underlying loan agreement are the Lender and the Borrower. The parties to the guarantee are the Guarantor and the Lender.
A guarantee will normally be put into place at the request of the Lender (who will have entered into a separate Loan Agreement with the Borrower), before they will provide the finance.
Under the Guarantee Agreement, the Lender can request the Guarantor to repay the loan in the event that the Borrower defaults on its obligations under the Loan Agreement. The repayment by the Guarantor is ‘on demand’, which means that, following default by the Borrower, there is no waiting period before the Lender can claim against the Guarantor.
This Short Form Limited Guarantee Agreement favours the Lender. It incorporates an indemnity, which provides greater protection to the Lender than a straight guarantee. However, it also contains a provision which limits the maximum amount for which the guarantor may be liable. If unlimited liability is required, please see below right Short Form Unlimited Guarantee Agreement.
This Short Form Limited Guarantee Agreement is suitable for smaller sized loans. If the Lender requires more detailed risk protection, then you are advised to download and use the 'Long Form Limited Guarantee and Indemnity’.
If you are looking for a document to cover a personal guarantee, please look at the ‘Personal Guarantee’. This document is drafted as a Deed, and accordingly care must be taken to ensure that the execution formalities are properly complied with.