Continuing Guarantee Agreement Template for the United Arab Emirates

A Continuing Guarantee Agreement is a vital financial security document that provides ongoing protection for lenders and creditors in the United Arab Emirates. Unlike a simple guarantee that covers a single transaction, this agreement creates a continuous obligation where you, as the guarantor, secure all present and future debts of the principal debtor to the beneficiary.

When do you need this document?

You will need a Continuing Guarantee Agreement when establishing revolving credit facilities, overdraft arrangements, or multiple loan agreements where the debt amount fluctuates over time. This document is particularly crucial in commercial banking relationships where businesses require ongoing financing flexibility. Property developers often use continuing guarantees to secure construction loans and development financing, while trading companies utilize them for letters of credit and trade finance facilities. Corporate groups frequently implement these agreements to guarantee subsidiary obligations or intercompany loans, and they are essential for syndicated lending arrangements involving multiple financial institutions.

Key legal considerations

Your guarantee obligation under UAE law is both primary and continuing, meaning you remain liable even if the principal debtor's circumstances change or the underlying debt is restructured. The agreement typically includes comprehensive indemnity provisions that extend beyond the guarantee itself, covering legal costs, enforcement expenses, and consequential damages. You should carefully review limitation clauses, as UAE law allows parties to agree on maximum liability amounts and specific termination conditions. The document must clearly define "Guaranteed Obligations" to avoid disputes about scope, and should include provisions for release conditions, such as written notice periods for termination. Cross-default clauses may make you liable if other unrelated obligations of the principal debtor are breached, significantly expanding your potential exposure.

Legal requirements in United Arab Emirates

Under UAE Federal Law No. 5 of 1985 (Civil Code), particularly Articles 1056-1093, your guarantee must be clearly documented and cannot exceed the principal obligation unless explicitly stated. The agreement must comply with UAE Commercial Transactions Law (Federal Law No. 18 of 1993) when securing commercial obligations, which includes specific disclosure requirements and formation procedures. If the beneficiary is a UAE bank or financial institution, the guarantee must align with UAE Central Bank regulations under Federal Law No. 14 of 2018, including any reporting requirements for significant exposures. You should ensure the agreement addresses potential bankruptcy scenarios under UAE Federal Law No. 9 of 2016, which affects guarantee enforceability if either party becomes insolvent. For Islamic finance transactions, the guarantee structure must comply with Shariah principles, potentially requiring additional certification from Shariah supervisory boards.