Guarantees and indemnities—general contract

Published by a ��Ӱ�� Commercial expert

Practice notes

In-house

Guarantees and indemnities—general contract

Published by a ��Ӱ�� Commercial expert

Practice notes

In-house

This Practice Note summarises the key elements of guarantees and indemnities, the circumstances in which they are used, issues that beneficiaries and lenders should consider in respect of the form of the guarantee or indemnity, and in the context of indemnities or guarantees granted by individuals or corporate entities.

For an example:

•
indemnity clause, see Precedent: Indemnity clause—commercial contracts
•
performance guarantee, see Precedent: Parent company guarantee—commercial contracts
•
payment guarantee, see the Precedents listed in: Guarantees—overview

For more information on guarantees and indemnities generally, see Practice Notes:

•
Guarantees
•
Indemnities in commercial contracts

Elements of a guarantee

A guarantee:

•
is a promise by the guarantor to the Beneficiary that a third party (the primary obligor) will perform an obligation, and/or if the third party does not perform, the guarantor will perform it or procure its performance
•
creates a secondary obligation (ie an obligation dependent on the primary obligor’s obligation), and
•
can never exceed the obligation of the primary obligor in the absence of wording to the contrary (ie if the primary obligor’s

Jurisdiction(s):

United Kingdom

Key definition:

Parent company guarantee definition

What does Parent company guarantee mean?

A promise by another company, usually the holding company, to take responsibility for any shortfall in the pension fund if the sponsor employer fails.

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