Q&As

How do I draft a guarantee that is limited by amount?

read titleRead full title
Published on LexisPSL on 29/11/2013

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • How do I draft a guarantee that is limited by amount?
  • Why you shouldn't draft the guarantee to cover only part of the loan
  • Why you should draft the guarantee to cover the whole of the loan with a cap on liability
  • Include a clause which defers the guarantor’s right to subrogation

How do I draft a guarantee that is limited by amount?

From a lender's perspective, it is important to draft a guarantee which is limited by amount as a guarantee of all of the loan, with a cap on liability.

You should not draft the guarantee as a guarantee of part of the loan.

For example, in the context of a loan for £50,000,000 which is to be made by a lender to a borrower under a facility agreement, you should draft a guarantee which is to be limited to say, £40,000,000, as follows:

'the guarantor irrevocably and unconditionally guarantees all of the borrower’s obligations to the lender under the facility agreement provided that the guarantor's liability under this guarantee is limited to an amount of £40,000,000'

You shouldn't draft the guarantee as follows:

'the guarantor irrevocably and unconditionally guarantees a sum of £40,000,000 in respect of the borrower’s obligations

Related documents:

Popular documents