Loan Guarantor Agreement Template for Canada

The Loan Guarantor Agreement is a crucial document in Canadian lending practices, used when a third party agrees to guarantee the repayment of a loan or the performance of other financial obligations. This document becomes necessary when a lender requires additional security beyond the borrower's own creditworthiness or assets, particularly in situations involving business loans, property purchases, or corporate financing. The agreement must comply with Canadian federal and provincial legislation, including the Interest Act and relevant provincial consumer protection laws. It details the nature and extent of the guarantee, the triggers for enforcement, and the guarantor's rights and obligations. A well-drafted Loan Guarantor Agreement is essential for protecting the lender's interests while ensuring clarity and fairness for all parties involved.

1. Parties: Identifies and defines the Lender, Borrower, and Guarantor(s)

2. Background: Recitals explaining the context of the loan agreement and the purpose of the guarantee

3. Definitions: Defines key terms used throughout the agreement, including 'Guaranteed Obligations', 'Event of Default', and 'Security'

4. Guarantee: Core section establishing the guarantee and its scope, including the guarantor's promise to pay and perform the guaranteed obligations

5. Nature of Guarantee: Specifies that the guarantee is continuing, unconditional, and absolute

6. Lender's Rights: Details the lender's rights to enforce the guarantee and seek payment from the guarantor

7. Guarantor's Obligations: Comprehensive list of the guarantor's duties, including payment, performance, and compliance obligations

8. Representations and Warranties: Guarantor's confirmations regarding their legal capacity, authority, and financial condition

9. Preservation of Rights: Confirms that the lender's rights are preserved despite any changes to the underlying loan or delays in enforcement

10. Expenses and Indemnity: Guarantor's obligation to pay enforcement costs and indemnify the lender

11. Notices: Procedures for giving formal notices under the agreement

12. Governing Law and Jurisdiction: Specifies Canadian law as governing law and determines jurisdiction for disputes

13. General Provisions: Standard boilerplate clauses including severability, entire agreement, and amendments