Guarantee Agreement For Loan for Philippines

Guarantee Agreement For Loan Template for Philippines

A Guarantee Agreement for Loan under Philippine law is a legally binding document where a guarantor assumes the responsibility to fulfill the payment obligations of a borrower if the borrower defaults on a loan. The agreement is governed by the Civil Code of the Philippines, particularly Articles 2047-2084 on Guaranty, and must comply with Philippine banking regulations when financial institutions are involved. The document establishes the scope of the guarantee, conditions for enforcement, rights and obligations of all parties, and includes specific provisions for payments, notices, and dispute resolution under Philippine jurisdiction.

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What is a Guarantee Agreement For Loan?

The Guarantee Agreement For Loan is a crucial document in Philippine financial transactions, commonly used when a third party (guarantor) provides additional security for a borrower's loan obligations. This agreement becomes necessary when a lender requires extra assurance beyond the borrower's creditworthiness, particularly in large commercial loans, real estate financing, or corporate borrowing. The document must comply with Philippine civil law requirements and banking regulations, especially the Civil Code provisions on guaranty and the General Banking Law of 2000. It typically includes detailed terms about the guarantee's scope, enforcement mechanisms, guarantor's obligations, and remedies available to the lender. The agreement is particularly important in the Philippine context where family-owned businesses often provide cross-guarantees for corporate loans, and where parent companies frequently guarantee subsidiaries' obligations.

What sections should be included in a Guarantee Agreement For Loan?

1. Parties: Identifies and defines all parties to the agreement: the Guarantor, the Lender (beneficiary), and the Borrower (principal debtor)

2. Background: Recitals explaining the context of the guarantee, including details of the underlying loan agreement

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

4. Guarantee and Indemnity: Core section detailing the scope of the guarantee, including the guarantor's obligations and the maximum liability amount

5. Nature of Guarantee: Specifies that the guarantee is continuing, irrevocable, and unconditional (subject to terms)

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

7. Preservation of Rights: Lender's rights to enforce the guarantee and circumstances that do not affect the guarantee's validity

8. Payments: Terms for how and when payments must be made, including currency, method, and dealing with taxes

9. Costs and Expenses: Allocation of costs related to the preparation, enforcement, and amendment of the guarantee

10. Notices: Procedure for giving notices under the agreement, including addresses and acceptable methods

11. Governing Law and Jurisdiction: Confirms Philippine law as governing law and specifies jurisdiction for disputes

What sections are optional to include in a Guarantee Agreement For Loan?

1. Security: Include when the guarantee is secured by specific assets or collateral

2. Multiple Guarantors: Include when there are multiple guarantors, defining joint and several liability

3. Assignment and Transfer: Include when parties want to specifically allow or restrict the ability to assign or transfer rights

4. Corporate Guarantor Provisions: Include when the guarantor is a corporation, with specific representations about corporate authority

5. Limitation of Liability: Include when there is a need to cap the guarantor's maximum liability

6. Step-In Rights: Include when the guarantor is given rights to step into the borrower's position

7. Financial Covenants: Include when the guarantor must maintain certain financial ratios or conditions

What schedules should be included in a Guarantee Agreement For Loan?

1. Schedule 1 - Form of Demand: Standard form for making a demand under the guarantee

2. Schedule 2 - Underlying Loan Agreement: Copy or key terms of the loan agreement being guaranteed

3. Schedule 3 - Security Details: Details of any security or collateral (if applicable)

4. Schedule 4 - Guarantor Information: Detailed information about the guarantor, including address and contact details

5. Schedule 5 - Conditions Precedent: List of documents and conditions required before the guarantee becomes effective

6. Appendix A - Required Notices: Forms of notices required under the agreement

7. Appendix B - Payment Details: Bank account and payment information for making payments under the guarantee

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

Philippines

Publisher

Genie AI

Document Type

Financing Agreement

Cost

Free to use

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