Guarantee checklist
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Term | Explanation | Comment |
---|---|---|
Consideration | Is there consideration for the guarantee | |
Permanence | Is the guarantee is unconditional, irrevocable and continuing | |
Unaffected | Is the guarantee unaffected by: | |
interim payments | ||
obligor’s insolvency | ||
amendment or discharge of obligor’s obligations | ||
beneficiary’s waiver or forbearance to obligor | ||
other customary grounds for discharge of guarantees | ||
Punctual performance | Guarantee is of the obligor’s “punctual performance” | |
Without prejudice | Guarantee is without prejudice to beneficiary’s rights against obligor | |
Independence | Guarantee is independent of any other credit support arrangement between beneficiary and obligor. | |
Indemnity | Against beneficiary’s costs of enforcement of guaranteed obligations | |
Wrt the value of obligations which have become void or unenforceable against the obligor | ||
Currency and payment | Payment must be in immediately available funds in the currency of the underlying obligations | |
No set-off or counterclaim | No set-off or counterclaim against moneys beneficiary owes the guarantor | |
Interest | interest 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 demand under the guarantee without taking steps against the obligor | |
No discharge if prejudice | Beneficiary does not have discharge the guarantee if that might prejudice its claim under insolvency laws. | |
Reinstatement | If beneficiary discharges guarantee following a payment that is then set aside, voided or found unenforceable, guarantor’s liability is reinstated. | |
Guarantor’s rights versus obligor | Until guaranteed obligations are fully paid guarantor can only proceed against the obligor with the beneficiary’s consent, and holds any sums it receives from the obligor to the beneficiary’s order. | |
Tax gross-up | If the guarantor is subject to some withholding that the obligor wouldn’t have been the guarantor has to gross up |