Guarantee checklist
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Issue | Narrative | Comment |
---|---|---|
Consideration | Is there consideration for the guarantee | |
Permanence | Is it unconditional, irrevocable and continuing | |
Unaffected | Is it 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 | Does it guarantee the obligor’s “punctual performance” | |
Without prejudice | Is it without prejudice to beneficiary’s rights against obligor | |
Independence | Is it independent of any other credit support arrangement between beneficiary and 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 | |
No set-off or counterclaim | Is set-off or counterclaim against moneys beneficiary owes the guarantor excluded | |
Interest | Must 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 | |
No discharge if prejudice | May beneficiary decline to discharge the guarantee if itmight prejudice its claim under insolvency laws | |
Reinstatement | If beneficiary discharges guarantee is guarantor’s liability reinstated should payments be set aside | |
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 the obligor in those circumstances to beneficiary’s order | ||
Tax gross-up | Must guarantor gross up if subject to withholding on guarantee payments |