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A form of {{t|credit support}} where one chap agrees to make good the obligations of another chap to a third party, if the second chap can’t or won’t. | {{a|security|}}A form of {{t|credit support}} where one chap agrees to make good the obligations of another chap to a third party, if the second chap can’t or won’t. | ||
===Types of [[guarantee]]=== | ===Types of [[guarantee]]=== | ||
There's a saying in legal circles: [[anus matronae parvae malas leges faciunt]]: ''little old ladies make bad law''. | There's a saying in legal circles: [[anus matronae parvae malas leges faciunt]]: ''little old ladies make bad law''. | ||
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'''[[Assignment]] of a [[Guarantor]]’s rights'''<br> | '''[[Assignment]] of a [[Guarantor]]’s rights'''<br> | ||
A Guarantor has certain rights it acquires at law, even where it executes as a deed (such as the right of subrogation), and there is a risk that a [[guarantor]] who assigns these rights might somehow mysteriously compromise a beneficiary’s rights under the guarantee. So, to be sure, limit that right of assignment. | A Guarantor has certain rights it acquires at law, even where it executes as a deed (such as the right of subrogation), and there is a risk that a [[guarantor]] who assigns these rights might somehow mysteriously compromise a beneficiary’s rights under the guarantee. So, to be sure, limit that right of assignment. | ||
'''Parental [[guarantee]]s under the {{isdama}}'''<br> | '''Parental [[guarantee]]s under the {{isdama}}'''<br> | ||
{{isdaguaranteewarning}} | {{isdaguaranteewarning}} | ||
'''The perils of unilateral termination rights'''<br> | '''The perils of unilateral termination rights'''<br> | ||
A related point: be careful about allowing the [[guarantor]] a termination right, even if amounts owing before termination are meant to remain [[guarantee|guaranteed]]. For a [[mark-to- market]] exposure under a [[master agreement]], whither the guaranteed obligation ? The [[mark-to-market]] exposure isn't, of itself, an obligation, at least not until until the contract has been closed out. Until then it is an emergent property of all the live [[transaction|transactions]] under the [[master agreement]]. Nor are those transactions "existing obligations" in whole: each will comprise future obligations, which may be contingent, and in any case are not yet due. | A related point: be careful about allowing the [[guarantor]] a termination right, even if amounts owing before termination are meant to remain [[guarantee|guaranteed]]. For a [[mark-to- market]] exposure under a [[master agreement]], whither the guaranteed obligation ? The [[mark-to-market]] exposure isn't, of itself, an obligation, at least not until until the contract has been closed out. Until then it is an emergent property of all the live [[transaction|transactions]] under the [[master agreement]]. Nor are those transactions "existing obligations" in whole: each will comprise future obligations, which may be contingent, and in any case are not yet due. | ||
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*[[Indemnity]] | *[[Indemnity]] | ||
*[[Subrogation]] | *[[Subrogation]] | ||
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