82,891
edits
Guarantee: Difference between revisions
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 1: | Line 1: | ||
{{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. | {{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''. | |||
In the history of the common law, more [[little old ladies]] than you’d expect seem to have given [[guarantee]]s.The common law is therefore littered with well-meaning judgments applying (and, frankly, making up) idiosyncratic, counter-intuitive and at times plainly stupid rules just to let little old lady-guarantors off the hook. | In the history of the common law, more [[little old ladies]] than you’d expect seem to have given [[guarantee]]s.The common law is therefore littered with well-meaning judgments applying (and, frankly, making up) idiosyncratic, counter-intuitive and at times plainly stupid rules just to let little old lady-guarantors off the hook. | ||
| Line 22: | Line 22: | ||
Consider providing for a lengthy notice period in such a termination period, which allows the [[beneficiary]] to adjust [[initial margin]] and precipitate a [[failure to pay]] (or rebase its [[credit support]] into tangible [[collateral]]). Alternatively make the termination of the [[master agreement]] a [[condition precedent]] to terminating the [[guarantee]]. | Consider providing for a lengthy notice period in such a termination period, which allows the [[beneficiary]] to adjust [[initial margin]] and precipitate a [[failure to pay]] (or rebase its [[credit support]] into tangible [[collateral]]). Alternatively make the termination of the [[master agreement]] a [[condition precedent]] to terminating the [[guarantee]]. | ||
==A brief anatomy== | |||
Here “guarantor” is the person providing the guarantee; “obligor” is the party whose obligations the guarantor guarantees and the “beneficiary” is the counterparty to the obligor who benefits from the guarantee. | |||
===The Guarantee=== | |||
*State the [[consideration]] | |||
*Say the guarantee is ''unconditional'' and ''irrevocable''; | |||
*[[Continuing guarantee]]: Say it is “continuing”. Be clear it won’t be impaired by: | |||
:*interim (re)payments, | |||
:*the obligor’s insolvency (you’d like to think this would go without saying but ''guarantees are places you don’t want to assume anything'') | |||
:*amendment, discharge or vitiation of the obligor’s obligations | |||
:*any [[waiver]] or forbearance by the beneficiary (against either the obligor or the guarantor) | |||
:*any other customary grounds for discharge of guarantees. | |||
*The “punctual performance” of the guaranteed obligations: makes [[Time is of the essence|time of the essence]]. | |||
*Is given without prejudice to beneficiary’s rights against obligor | |||
*Is independent of any other security or [[credit support arrangement]]. | |||
===Indemnity=== | |||
Indemnity is against expenses incurred as a result of obligor’s non-performance, and also the value of obligations which have become void or enforceable against the obligor for any reason | |||
===Currency and payment=== | |||
*Currency: Payment must be in the currency of the underlying obligations | |||
*Freely available funds: in immediately available funds and without set-off or counterclaim, | |||
*Interest: with interest at such rate as beneficiary reasonably determines, from the date of demand until payment in full. | |||
*Suspense account: beneficiary may place amounts beneficiary pays into a suspense account pending satisfaction in full. | |||
===Demand process== | |||
Beneficiary may make a demand under the guarantee without having taken any steps against the obligor | |||
===Discharge=== | |||
*Beneficiary does not have discharge guarantee if doing so might prejudice its claim under insolvency laws. | |||
* if beneficiary discharges guarantee following a payment that is then set aside, voided or found unenforceable, your liability will be reinstated as if we had not discharged the Guarantee. | |||
{{sa}} | {{sa}} | ||