Personal Guarantee Agreement Template for the United Arab Emirates

A Personal Guarantee Agreement is a legally binding contract where you, as a guarantor, promise to pay a debt or fulfill an obligation if the primary borrower defaults. In the United Arab Emirates, these agreements are governed by strict legal requirements under the Civil Code and must align with Islamic law principles to ensure enforceability in UAE courts.

When do you need this document?

You'll encounter Personal Guarantee Agreements in various commercial situations throughout the UAE. Banks and financial institutions typically require personal guarantees when extending business loans, particularly for small and medium enterprises where additional security is needed. Property rental agreements often include personal guarantees, especially for commercial leases where landlords seek assurance beyond security deposits. Corporate transactions frequently involve personal guarantees from directors or shareholders to secure supplier agreements, equipment financing, or joint venture obligations. If you're establishing a business partnership or seeking trade credit from suppliers, you may be asked to provide a personal guarantee to demonstrate your commitment to the commercial relationship.

Key legal considerations

Under UAE law, your personal guarantee creates unlimited liability unless specifically capped in the agreement. The document must clearly define the guaranteed obligations, including whether it covers the principal amount only or extends to interest, penalties, and legal costs. You should carefully review the guarantee period and any termination clauses that might affect your ongoing liability. The agreement should specify whether your guarantee is joint and several with other guarantors, as this determines whether creditors can pursue you for the full amount regardless of other guarantors' ability to pay. Consider negotiating limitations on your liability, such as maximum amounts or specific time periods, and ensure the document includes proper notice requirements before the guarantee can be enforced against you.

Legal requirements in United Arab Emirates

UAE Federal Law No. 5 of 1985 governs guarantee contracts through Articles 1092-1123, establishing the framework for valid guarantee agreements. Your guarantee must be in writing and clearly identify all parties, including the guarantor, beneficiary, and principal debtor. The document must specify the guaranteed amount or provide a clear method for calculating liability, and it should reference the underlying obligation being guaranteed. Under UAE Commercial Transactions Law, commercial guarantees require additional compliance measures, particularly regarding disclosure and notification requirements. The agreement must respect Sharia principles, ensuring the guarantee structure doesn't involve prohibited elements such as excessive uncertainty (gharar) or interest (riba) that could render it unenforceable. For banking transactions, compliance with Central Bank regulations may require additional documentation and witness requirements to ensure the guarantee meets regulatory standards.