A deed of guarantee is a legal document in which one party, known as the guarantor, agrees to take on the responsibility of fulfilling the obligations of another party, known as the principal debtor if the principal debtor fails to do so. The deed of guarantee outlines the terms and conditions of the guarantee arrangement, including the obligations of the guarantor and the circumstances under which the guarantee may be invoked.
Here are some key components typically included in a deed of guarantee:
Parties Involved: The deed identifies the parties involved, including the guarantor (the party providing the guarantee) and the principal debtor (the party whose obligations are being guaranteed).
Guaranteed Obligations: The deed specifies the obligations of the principal debtor that are guaranteed by the guarantor. These obligations could include repayment of a loan, fulfilment of a contractual obligation, or payment for goods or services.
Guarantee Amount: The deed specifies the maximum amount for which the guarantor is liable under the guarantee. This amount may be expressed as a specific sum of money or as a percentage of the principal debtor’s obligations.
Conditions for Invocation: The deed outlines the circumstances under which the guarantee may be invoked, such as the failure of the principal debtor to make a payment or fulfil a contractual obligation.
Indemnity Clause: The deed may include an indemnity clause, whereby the principal debtor agrees to indemnify the guarantor for any losses or expenses incurred as a result of invoking the guarantee.
Duration and Termination: The deed specifies the duration of the guarantee arrangement and any conditions under which the guarantee may be terminated, such as the repayment of the guaranteed obligations.