Guarantee Agreement for the United Kingdom

Guarantee Agreement Template for United States

A Guarantee Agreement is a legally binding document under U.S. law where one party (the guarantor) promises to assume the debt, default, or miscarriage of another party (the primary debtor) to a third party (the creditor). This agreement, governed by both federal and state laws, including the Uniform Commercial Code, creates a secondary obligation that provides additional security to the creditor. It must be in writing to satisfy the Statute of Frauds and typically includes specific terms regarding the scope of the guarantee, enforcement mechanisms, and any limitations or conditions.

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What is a Guarantee Agreement?

The Guarantee Agreement serves as a critical risk mitigation tool in various commercial and financial transactions under U.S. law. This document is typically used when a creditor requires additional security beyond the primary debtor's promise to pay or perform. The agreement specifies the guaranteed obligations, the conditions under which the guarantee can be called upon, and any limitations on the guarantor's liability. The document must comply with both federal regulations and state-specific requirements, particularly regarding enforceability and the Statute of Frauds. A well-drafted Guarantee Agreement is essential for protecting the creditor's interests while clearly defining the guarantor's obligations.

What sections should be included in a Guarantee Agreement?

1. Parties: Identification of guarantor, creditor, and primary debtor

2. Background: Context of the guarantee and relationship between parties

3. Definitions: Key terms used throughout the agreement including guaranteed obligations, enforcement events, and relevant dates

4. Guarantee: Core obligations and scope of the guarantee, including nature and extent of guarantor's liability

5. Nature of Guarantee: Specification of whether the guarantee is continuing, limited/unlimited, and primary/secondary

6. Enforcement: Terms and conditions for enforcing the guarantee, including notice requirements and enforcement process

7. Representations and Warranties: Guarantor's confirmations regarding capacity, authority, and financial condition

8. Governing Law: Applicable jurisdiction and law governing the agreement

What sections are optional to include in a Guarantee Agreement?

1. Security: Details of any collateral or assets securing the guarantee

2. Multiple Guarantors: Provisions for joint and several liability when multiple guarantors are involved

3. Assignment: Rights and restrictions regarding assignment of the guarantee

4. Subordination: Priority arrangements with other creditors and ranking of guarantee obligations

What schedules should be included in a Guarantee Agreement?

1. Schedule of Guaranteed Obligations: Detailed list and description of all obligations covered by the guarantee

2. Security Details: Comprehensive description of any collateral or security arrangements

3. Form of Demand: Template and procedures for making demands under the guarantee

4. Financial Covenants: Schedule of ongoing financial requirements and tests for the guarantor

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

United States

Publisher

Genie AI

Document Type

Agreement Contract

Cost

Free to use

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