Long Form Limited Guarantee and Indemnity
This Long Form Limited Guarantee and Indemnity is a legally binding document that allows for one party to assume liability for the obligations of another under a separate loan agreement. The parties to the underlying loan agreement are the Lender and the Borrower, whereas 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 a default by the Borrower, there is no waiting period before the Lender can claim against the Guarantor.
This Guarantee Agreement favours the Lender. It incorporates an indemnity, which provides greater protection to the Lender than a straight guarantee. However, this Long Form Guarantee Agreement contains a provision which limits the maximum amount for which the guarantor may be liable. If unlimited liability is required, please see below right ‘All Monies Guarantee and Indemnity’.
This document has extensive provisions and is best suited to large transactions. It provides the beneficiary with greater layers of risk protection than the Short Form Limited Guarantee version.
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.