A Deed of Guarantee and Indemnity is an essential document, often signed alongside a contract, to ensure that a third parties guarantees and indemnities are legally enforceable.
These types of agreements are most common in financing or borrowing arrangements to guarantee the repayment of a loan and indemnify the lender for loss. While this type of agreement is often used in the context of loans it is not limited to this application. This can also be used to require a party to perform a specific obligation agreed to in the contract.
How Does a Deed of Guarantee and Indemnity Work?
A Deed of Guarantee and Indemnity is a complicated document that can have significant implications for the guarantor/indemnifier. It is important to note that a Deed is a more powerful form of promise than a contract and is capable of being more strictly enforced by the Courts. Therefore, the parties must clearly identify exactly what they are legally obliged to do in the terms of the guarantee and indemnity. The guarantor should understand the party they are providing the guarantee for and how likely they are to fulfil their obligations to the other party.