The Suretyship Agreement serves as a critical risk mitigation tool in Pakistani commercial transactions, providing creditors with additional security for their loans or other obligations. This document is essential when a third party needs to guarantee the performance or payment obligations of a principal debtor, commonly used in banking, commercial lending, construction contracts, and various business transactions. The agreement must comply with the Pakistani Contract Act 1872, particularly sections 126-147 which specifically govern contracts of guarantee, and may also need to align with Islamic banking principles depending on the nature of the transaction. The document includes detailed provisions on the extent of liability, enforcement mechanisms, and the rights and obligations of all parties, while incorporating necessary safeguards to ensure enforceability under Pakistani law.

1. Parties: Identifies and defines all parties to the agreement: the Surety, the Creditor, and the Principal Debtor

2. Background: Explains the context of the suretyship, including the principal debt or obligation being guaranteed

3. Definitions and Interpretation: Defines key terms used throughout the agreement and establishes interpretation rules

4. Guarantee and Indemnity: Details the scope and nature of the guarantee, including the surety's primary obligations

5. Extent of Liability: Specifies the maximum amount of the surety's liability and any limitations

6. Duration of Guarantee: Defines the time period for which the guarantee remains valid and conditions for termination

7. Payment Terms: Specifies when and how payments must be made by the surety upon default by the principal debtor

8. Surety's Rights and Obligations: Lists the specific rights and duties of the surety, including rights of subrogation

9. Creditor's Rights and Obligations: Details the creditor's obligations and rights in relation to both the surety and principal debtor

10. Events of Default: Defines circumstances that constitute default and trigger the surety's obligations

11. Enforcement: Outlines the process for enforcing the guarantee and claiming against the surety

12. Notices: Specifies how formal communications between parties should be made and delivered

13. Governing Law and Jurisdiction: Confirms Pakistani law as governing law and specifies jurisdiction for disputes

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