Guarantee

Components of a guarantee

• Continuing guarantee: A continuing guarantee is one where the guarantor assumes liability for all the debtor’s past, present and future obligations to a creditor. Even where the amount owing has been paid in full, the guarantor can still be liable under the same facility if there is a subsequent indebtedness. This is useful for revolving credit facilities and other forms of indebtedness with a “now you see it, now you don’t” sort of a flavour to them.

This is to overcome a principle articulated in Devaynes v Noble that payments are presumed reduce debts in the order in which the debts are incurred.

• Demand guarantee: A demand guarantee is a guarantee that the guarantor must honour upon the beneficiary’s demand. The beneficiary is not required to first make a claim or take any action against the obligor of the obligation that the guarantee supports. A demand guarantee is enforceable notwithstanding any deficiencies in the enforceability of the underlying obligation.
• Template:Guarantee Indemnity description

See Also

• Credit Support Document
• Guarantees of the ISDA