A standard Deed/Contract of Guarantee is given to a Lender in return for the grant/to continue to grant the Loan to the Borrower. This is drafted in Neutral Form.
The Guarantor requests the Lender to grant or to continue to grant the Loan to the Borrower. With a view to obtaining the Lender's Loan to the Borrower, the Guarantor has agreed at the request of the Lender to give a guarantee and indemnity in respect of the obligations and liabilities of Loan as are set out in the Schedule to this Guarantee.
The Guarantee is only a recommended form of guarantee and indemnity. In deciding whether to adopt the Guarantee, the mortgage lender should consider whether the Guarantee is compatible with its operational procedures and the complexity of the loan transaction. The use of the Guarantee for any mortgage transaction is entirely voluntary by the mortgage lender and the guarantor.
The Guarantee provides a contract of guarantee and indemnity in respect of loan(s) granted by the lender by way of facility agreement(s). However, one distinctive feature of the Guarantee is that the guarantor’s liability is limited to the specified amount of the loan plus interest, costs and expenses.
If the Guarantor signs this Guarantee, the Guarantor will become liable instead of, or as well as, the Borrower under the loan for:
(a) the amount of the Loan owing by the Borrower;
(b) the amount of any Additional Loan the Lender lent the Borrower with the Guarantor's approval;
(c) the Expenses payable by the Guarantor under this Guarantee; and
(d) all interest, default interest, late charges and other charges charged on any of the above sums.
The Guarantor will be required to pay immediately under this Guarantee on written demand from the Lender.
This Guarantee is a guarantee and an indemnity of the full amount of the Debt and the Expenses. However, the Guarantor will not be liable to the Lender under this Guarantee for any Additional Loan unless the Guarantor has given the Guarantor's written approval to the Additional Loan being made, or unless the Guarantor later agrees in writing to be liable for it.
The Lender may still make the Additional Loan to the Borrower even if the Guarantor has not given the Guarantor's written approval to the Additional Loan being made. If the Lender does so, this will not affect the Guarantor's liability to repay the Debt (not including that Additional Loan) to the Lender.
Upon the Guarantor needing to request the lender to grant or to continue to grant the loan to the borrower, this contract of guarantee template may be used.
This document should be carefully read by both parties.
Both parties should sign and return a copy, and once signed, both parties should get a copy. To avoid any future disputes, both parties may wish to have their signatures witnessed.
If either party wishes to amend the agreement in the future, both parties should agree to do so, and the original agreement and amendments should be recorded in writing and signed by both parties.
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