Loan Guaranty Agreement Template for Philippines

A Loan Guaranty Agreement is a crucial document in Philippine banking and finance practice, commonly used when a lender requires additional security beyond the borrower's own covenant. This document becomes necessary when the borrower's creditworthiness alone is insufficient to secure the loan, or when regulatory requirements mandate additional security. The agreement, governed by Philippine law, particularly the Civil Code and banking regulations, establishes a secondary obligation where the guarantor promises to pay the borrower's debt upon default. It defines the scope of guaranteed obligations, enforcement mechanisms, and the rights and obligations of all parties. The document is especially relevant in commercial lending, project finance, and corporate borrowing scenarios, where it provides an additional layer of security for the lender while facilitating access to credit for borrowers.

1. Parties: Identifies the guarantor, lender (creditor), and borrower (principal debtor), including their complete legal names and addresses

2. Background: Describes the underlying loan agreement and explains why the guaranty is being provided

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

4. Scope of Guaranty: Clearly defines the extent of the guarantor's obligations and the specific debts or obligations being guaranteed

5. Nature of Guaranty: Specifies whether the guaranty is continuing, unconditional, irrevocable, and/or joint and several

6. Guarantor's Representations and Warranties: Sets forth the guarantor's declarations regarding their legal capacity, authority, and financial condition

7. Payment Obligations: Details the circumstances triggering payment obligations and the process for demanding payment from the guarantor

8. Preservation of Rights: Establishes that the lender's rights against the guarantor are not affected by modifications to the underlying loan or actions regarding the borrower

9. Subrogation and Indemnity: Outlines the guarantor's rights of subrogation and any indemnification provisions

10. Duration and Termination: Specifies when the guaranty becomes effective and under what circumstances it may be terminated

11. Governing Law and Jurisdiction: Confirms Philippine law as governing law and specifies courts having jurisdiction

12. Notices: Provides the mechanism and addresses for formal communications between parties

13. Miscellaneous: Contains standard boilerplate provisions including severability, entire agreement, and amendments