Guarantee and Indemnity (New Zealand)

A Guarantee and Indemnity in New Zealand commits a guarantor to meet another party's obligations if they default and defines the extent of that liability, enforceable under the Contract and Commercial Law Act 2017.

Under Section 27 of the Contract and Commercial Law Act 2017, a guarantee must be in writing and signed by the guarantor or their agent to be enforceable — a verbal guarantee has no legal force. Section 28 of the Contract and Commercial Law Act 2017 provides for the guarantor's right of contribution from co-guarantors. The High Court of New Zealand and Court of Appeal have held that guarantees may be set aside for undue influence, unconscionability, or non-disclosure where the guarantor was not independently advised. For consumer credit guarantees, the Credit Contracts and Consumer Finance Act 2003 (CCCFA) imposes strict disclosure requirements on the creditor and gives the Disputes Tribunal of New Zealand and District Court jurisdiction to reopen oppressive guarantees under Section 118 of the CCCFA. Major New Zealand banks — ANZ, ASB, BNZ, Westpac, and Kiwibank — routinely require personal guarantees from company directors as a condition of business lending, and standard bank guarantee forms include unlimited liability and continuing guarantee clauses drafted to maximise the bank's protection under New Zealand law.

A Guarantee and Indemnity is needed in New Zealand whenever a creditor, lender, or landlord requires a third party to stand behind the financial obligations of another person or entity before extending credit, granting a loan, or entering a significant commercial arrangement. Bank lending to companies: major New Zealand banks routinely require personal guarantees from company directors and shareholders before advancing business loans, overdrafts, or commercial mortgages. Without a guarantee, the bank's recourse on default is limited to the company's assets. Commercial leases: landlords of commercial properties under the Property Law Act 2007 frequently require a director, shareholder, or related company to guarantee the tenant's rent and other obligations for the full term of the lease or for a defined guarantee period. The guarantee provides the landlord with recourse against the guarantor's personal assets if the tenant defaults or becomes insolvent. Trade credit: suppliers and wholesalers extending credit to business customers may require a guarantee from the business owner to reduce the risk of unpaid invoices. Equipment finance: finance companies and hire purchase providers under the Credit Contracts and Consumer Finance Act 2003 require personal guarantees from business owners to support equipment lending. Construction: subcontractors or suppliers on large construction projects may require a performance guarantee from the head contractor's parent company or directors. The guarantee is also needed when a lender seeks to refresh or replace an existing guarantee — for example, when a new director joins a company and the lender requires the new director to provide a personal guarantee consistent with the existing directors' obligations. Pair a Guarantee and Indemnity with a Loan Agreement to document the underlying obligation being guaranteed and the terms of the lending arrangement, so that both documents together provide a complete and enforceable security package under New Zealand law.

A Guarantee and Indemnity is also needed when a New Zealand lender seeks to refresh an existing guarantee — for example, when a new director joins a borrowing company and the lender requires the new director to provide a personal guarantee. Under Section 27 of the Contract and Commercial Law Act 2017, the new guarantee must be in writing and signed. Pair with a Loan Agreement to document the underlying obligation, ensuring both documents together form an enforceable security package under New Zealand law. The forms-legal.com Guarantee and Indemnity (New Zealand) template covers all key elements required by the Contract and Commercial Law Act 2017 and Credit Contracts and Consumer Finance Act 2003.

A New Zealand Guarantee and Indemnity compliant with section 27 of the Contract and Commercial Law Act 2017 must include the following key elements. Parties: the full legal names and addresses of the guarantor, the creditor, and the principal debtor. In commercial lending, this will be the director or shareholder (guarantor), the bank or finance company (creditor), and the borrowing company (principal debtor). Guaranteed obligations: a precise description of the obligations being guaranteed — whether a specific loan facility with a maximum limit in NZD, all present and future debts owing by the principal debtor to the creditor, or the obligations under a specific contract such as a commercial lease or supply agreement. Liability cap: whether the guarantee is limited to a specific NZD amount (a capped guarantee) or unlimited. Banks typically require unlimited personal guarantees from directors. Commercial lease guarantees are commonly limited to 12 to 24 months of rent and outgoings. Indemnity clause: a primary obligation by the guarantor to indemnify the creditor against all losses, costs, and expenses arising from the debtor's default, independent of the validity of the principal obligation, ensuring the creditor can claim even if the guarantee is technically unenforceable. Continuing guarantee provision: a statement that the guarantee is a continuing security covering all present and future obligations of the principal debtor, and is not discharged by any payment, settlement, or change in the debtor's circumstances. No-variation release: a provision protecting the creditor against the common law rule that a material variation to the guaranteed obligation without the guarantor's consent discharges the guarantee — commercial guarantees typically include an express waiver of this defence. Notice provisions: the circumstances in which the creditor must notify the guarantor of the debtor's default before calling on the guarantee, and how notices are to be served. Governing law and jurisdiction: New Zealand law governs the guarantee, with disputes resolved by the High Court of New Zealand. Signature and witness requirements: the guarantee must be in writing and signed by the guarantor under section 27 of the Contract and Commercial Law Act 2017. For guarantees securing mortgage lending, additional witnessing requirements may apply under the Property Law Act 2007. The forms-legal.com Guarantee and Indemnity (New Zealand) template provides all of these elements in a format suitable for commercial guarantee arrangements in New Zealand.

Additional key elements required for a compliant New Zealand guarantee include: Section 27 of the Contract and Commercial Law Act 2017 signature requirements — the guarantee must be in writing and signed by the guarantor or their authorised agent; Section 17 of the Credit Contracts and Consumer Finance Act 2003 disclosure requirements where the guarantee secures a consumer credit contract, including provision of the guarantee certificate and a copy of the credit contract to the guarantor before signing; Independent legal advice certificate confirming the guarantor received advice from a qualified New Zealand solicitor about the nature, extent, and risks of the guarantee — required by major banks including ANZ, ASB, BNZ, Westpac, and Kiwibank; Undue influence protection provisions, addressing the risk that the High Court of New Zealand may set aside a guarantee where the guarantor was improperly pressured — particularly relevant for spousal and family guarantees; Cross-default provisions linking the guarantee to other facilities; and Section 55 of the Property Law Act 2007 requirements for guarantees secured against real property. The forms-legal.com Guarantee and Indemnity (New Zealand) template includes all of these provisions in a format suitable for commercial guarantee arrangements governed by New Zealand law.