Commentary

10 Drafting considerations for guarantees

BANKING vol 4(1)
| Commentary

10 Drafting considerations for guarantees

| Commentary

10 Drafting considerations for guarantees

As a matter of common law a contract of guarantee may be avoided by the guarantor should there be any material variation or indulgence in relation to the terms of the underlying debt. It is for this reason that standard bank guarantees contain a number of terms providing that the liability of the guarantor is to be unaffected by such events. Practitioners should ensure that the draft covers the following potential future events as a minimum:

  1. 10.1

        A material variation in the terms of the underlying debt.

  2. 10.2

        The grant of time to pay

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