Guarantee checklist

ISDA Anatomy™ incorporating our exclusive ISDA in a Nutshell™ Go Premium Index: Click ᐅ to expand: ISDA Navigation The Varieties of ISDA Experience Subject 2002 (wikitext) 1992 (wikitext) 1987 (wikitext) Preamble Pre Pre Pre Interpretation 1 1 1 Obligns/Payment 2 2 2 Representations 3 3 3 Agreements 4 4 4 EODs & Term Events 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • Tax Event • TEUM • CEUM • ATE • 5 Events of Default FTPD • Breach • CSD • Misrep • DUST • Cross Default • Bankruptcy • MWA Termination Events Illegality • FM • Tax Event • TEUM • CEUM • ATE • Early Termination 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off 6 Early Termination ET right on EOD • ET right on TE • Effect of Designation • Calculations • Set-off Transfer 7 7 7 Contractual Currency 8 8 8 Miscellaneous 9 9 9 Offices; Multibranch Parties 10 10 10 Expenses 11 11 11 Notices 12 12 12 Governing Law 13 13 13 Definitions 14 14 14 Schedule Schedule Schedule Schedule Termination Provisions Part 1 Part 1 Part 1 Tax Representations Part 2 Part 2 Part 2 Documents for Delivery Part 3 Part 3 Part 3 Miscellaneous Part 4 Part 4 Part 4 Other Provisions Part 5 Part 5 Part 5 Comments? Questions? Suggestions? Requests? Insults? We’d love to 📧 hear from you. Sign up for our newsletter.

A checklist, should you need one for an affiliate guarantee, offered up as a credit support document for an ISDA Master Agreement or other master trading arrangement.

ISDA alert: look out for Transaction-specific guarantees

As well as the guarantee checklist below - which is specific to the guarantee as a guarantee, there is an ISDA-specific trick to look out for. Beware of Transaction-specific guarantees.

Thanks to the curious architecture of the ISDA, transaction-specific guarantees, even if formally valid and enforceable per the below, won’t work because at the time when you invoke them, the Transaction has been terminated and its exposure aggregated under the master agreement proper. The reasons for this are complicated, so rather than rehearse them here, there is a separate article for them, here.

See also

• Guarantee
• Transaction-specific guarantee

Guarantee Checklist

Issue	Narrative	Check
Consideration	Is there consideration?
Permanence	Is it unconditional, irrevocable and continuing?
Unaffected	Is it unaffected by:
	Interim payments
	Obligor’s insolvency
	Obligor’s lack of capacity and authority
	Amendment or discharge of obligor’s obligations
	Beneficiary’s waiver or forbearance to the obligor
	Other customary grounds for discharge of guarantees
Punctual performance	Does it guarantee the obligor’s “punctual performance”?
Independence/other sureties	Is it independent of any other credit support arrangement between the beneficiary and obligor and unaffected by any other security or rights beneficiary may have against the obligor?
Indemnity	Is there an indemnity against beneficiary’s costs of enforcement of guaranteed obligations?
	Is there an indemnity wrt the value of obligations which are void/unenforceable against the obligor?
Currency and payment	Must payment must be in immediately available funds in the currency of the underlying obligations?
	If not, is there a currency indemnity?
No set-off or counterclaim	Is set-off or counterclaim against money the beneficiary owes the guarantor excluded?
Interest	Must the guarantor pay interest from the date of demand until payment in full?
Suspense account	May beneficiary place amounts beneficiary into a suspense account pending satisfaction in full?
Demand process	May beneficiary demand without first taking steps vs the obligor?
Conditional discharge and reinstatement	If beneficiary’s discharge of the guarantee conditional (or the guarantee expressed to be reinstated) if obligor’s payment obligations are set aside under insolvency laws? Alternatively may beneficiary decline to discharge the guarantee if it might prejudice its claim under insolvency laws?
Guarantor’s rights versus obligor	Must Guarantor obtain beneficiary’s consent before taking action against obligor until guaranteed obligations are fully paid?
	Must guarantor hold sums it receives from obligor pending satisfaction to beneficiary’s order
Tax gross-up	Must guarantor gross up if subject to withholding on guarantee payments?
Not a Transaction-specific guarantee	(when a credit support document under an ISDA Master Agreement, ensure it guarantees the obligor’s obligations under the ISDA Master Agreement itself, not just specific Transactions under the ISDA.