In relation to a loan, a counter indemnity is given by the indemnifier (usually the Borrower's parent) to the Guarantor for the Borrower's obligations. This is drafted in favour of the indemnifier.

 

This is drafted for the guarantor (Party 1) and the indemnifier (party 2) but is in favour of the indemnifier as they have requested the Guarantor to give the Guarantee to the Bank and the Guarantor has agreed to do so on condition that the Indemnifier enters into this Counter-Indemnity. The document pertains to the continuing indemnity constituted by the agreement, its discharge and release, demands, account suspensions and certificates setting forth the amount of any indemnified accounts.

 

The Indemnifier shall, upon a written demand made by the Guarantor, to fully indemnify any losses, claims, costs (including legal fees), charges and expenses incurred in relation to the Guarantee. The Indemnifier's liability under this Counter-Indemnity, however, shall not exceed the aggregate of the principal sum of a stated amount and all interest, fees, commissions, charges and expenses which have accrued under the Counter-Indemnity at any time up to the date of payment by the Indemnifier, whether before or after the date of demand.

 

The Indemnifier shall only be released or discharged from liability in this agreement where reimbursements have been fully made to the Guarantor in case of any loss suffered. The clause of continuing indemnity provides that even if this Counter-Indemnity ceases to be in force, the liability continues, and the Guarantor shall still be entitled to a full amount of indemnity.

 

The choice of law and jurisdiction clause provides that the governing law of the stated jurisdiction shall at the same time be the governing law of this Counter-Indemnity, which then binds the parties in this agreement to the laws, judgment or any other orders of this jurisdiction.

 

How to use this Document?

This document should be carefully read by the Guarantor and Indemnifier.

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.

The Principal Loan to be borrowed, Interest Rate, and Interest Payment Date should all be clearly stated in the loan agreement.

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.