Guarantee and Indemnity Agreement
THIS GUARANTEE AND INDEMNITY AGREEMENT (this "Agreement") is entered into on [Date] by:
[Guarantor Name], [Who Guarantor], with a principal address at [Guarantor Address], [Guarantor City], [Guarantor State] [Guarantor ZIP] (hereinafter referred to as the "Guarantor");
in favor of [Creditor Name], [Who Creditor], with its principal address at [Creditor Address], [Creditor City], [Creditor State] [Creditor ZIP] (hereinafter referred to as the "Creditor").
RECITALS
WHEREAS, the Creditor has agreed to provide or continue to provide facilities or enter into arrangements with [Debtor Name], with its principal address at [Debtor Address], [Debtor City], [Debtor State] [Debtor ZIP] (the "Principal Debtor"), in connection with: [Principal Obligations] (the "Principal Obligations");
WHEREAS, the Guarantor has agreed to give this Guarantee and Indemnity as security for the Principal Obligations at the request of the Principal Debtor and in consideration of the Creditor entering into or continuing the arrangements with the Principal Debtor;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. GUARANTEE
1.1 In consideration of the Creditor entering into or continuing the arrangements with the Principal Debtor as described in the Recitals above, the Guarantor unconditionally and irrevocably guarantees to the Creditor the due and punctual performance and payment by the Principal Debtor of all of the Principal Obligations.
1.2 If the Principal Debtor fails to perform or pay any of the Principal Obligations on the due date or in the manner required, the Guarantor shall, upon demand by the Creditor given in accordance with Section 4 of this Agreement, immediately perform or pay that obligation as if the Guarantor were the primary obligor.
1.3 This guarantee is given in compliance with the Statute of Frauds as enacted in the State of [Governing Law State], which requires a promise to answer for the debt, default, or miscarriage of another person to be in writing and signed by the party to be charged. This Agreement constitutes such written evidence. The Guarantor acknowledges that adequate consideration exists for this guarantee under UCC Article 3 and applicable state suretyship law.
2. INDEMNITY
2.1 As a separate and independent obligation, the Guarantor irrevocably and unconditionally agrees to indemnify the Creditor and hold the Creditor harmless against all losses, costs, damages, and expenses suffered or incurred by the Creditor arising from or in connection with any failure by the Principal Debtor to perform any of the Principal Obligations, or as a result of any obligation of the Principal Debtor being or becoming void, voidable, unenforceable, or ineffective for any reason.
2.2 The indemnity in Section 2.1 is a primary obligation and constitutes a separate and independent obligation from the guarantee in Section 1. The Creditor may enforce the indemnity whether or not it has first taken steps to enforce the guarantee or any other security.
2.3 The Guarantor's liability under this Agreement as indemnifier shall not be affected by any matter that would or might operate to limit or discharge its liability as guarantor.
3. PRESERVATION OF GUARANTOR'S RIGHTS
3.1 The Creditor may, without releasing or reducing the liability of the Guarantor, agree to any amendment or variation of the Principal Obligations or any other arrangement with the Principal Debtor; grant time, indulgence, or forbearance to the Principal Debtor; take, vary, exchange, release, or fail to perfect any other guarantee, indemnity, or security; make any composition or arrangement with the Principal Debtor; or exercise, fail to exercise, or enforce any right or remedy against the Principal Debtor or any other person.
3.2 The Guarantor hereby waives any and all suretyship defenses available under applicable state law, including but not limited to any defense based on impairment of collateral, release of a co-guarantor, modification of the principal obligation, or any other defense that might otherwise be available under the Restatement (Third) of Suretyship and Guaranty or applicable state statutes.
3.3 The Guarantor waives any right it may have to require the Creditor to take action against the Principal Debtor before demanding payment or performance from the Guarantor, including any right of marshaling, any right to require exhaustion of remedies, and any right of exoneration.
3.4 Until all of the Principal Obligations have been fully and irrevocably discharged, the Guarantor shall not exercise any right of subrogation, contribution, indemnity, or any other right against the Principal Debtor arising from this Agreement, without the prior written consent of the Creditor.
4. DEMAND
4.1 A demand under this Agreement shall be in writing, signed by an authorized officer of the Creditor, and delivered to the Guarantor at the address specified in this Agreement (or such other address as the Guarantor notifies in writing to the Creditor) by personal delivery, certified mail (return receipt requested), or nationally recognized overnight courier.
4.2 Before making a demand, the Creditor shall give the Guarantor not less than [Demand Notice Period] written notice of its intention to call on this Guarantee, specifying the amount demanded and the grounds for the demand.
4.3 The Guarantor shall pay the sum demanded within [Demand Notice Period] of the notice being served in immediately available funds to such account as the Creditor may specify in the demand notice.
5. REPRESENTATIONS AND WARRANTIES
5.1 The Guarantor represents and warrants to the Creditor that:
- the Guarantor has full power and authority to enter into and perform this Agreement;
- this Agreement constitutes valid and legally binding obligations of the Guarantor enforceable in accordance with its terms;
- the entry into and performance of this Agreement does not and will not conflict with any law, regulation, order, or agreement binding on the Guarantor; and
- no litigation, arbitration, or administrative proceeding is current or threatened against the Guarantor that would materially affect the Guarantor's ability to perform its obligations under this Agreement.
6. GENERAL PROVISIONS
6.1 Entire Agreement. This Agreement represents the entire agreement of the Guarantor with respect to the guarantee and indemnity of the Principal Obligations and supersedes any prior agreement or representation.
6.2 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the remaining provisions shall continue in full force and effect.
6.3 Assignment. The Creditor may assign its rights under this Agreement to any assignee of the Principal Obligations without the consent of the Guarantor. The Guarantor may not assign its obligations under this Agreement.
6.4 Amendments. No amendment to this Agreement shall be effective unless made in writing and signed by the Guarantor and the Creditor.
6.5 Notices. All notices required or permitted under this Agreement shall be in writing and shall be deemed duly given when delivered personally, sent by certified mail (return receipt requested), or sent by nationally recognized overnight courier to the addresses set forth herein.
7. GOVERNING LAW AND JURISDICTION
7.1 This Agreement and any dispute or claim arising out of or in connection with it shall be governed by and construed in accordance with the laws of the State of [Governing Law State], without regard to its conflict of laws principles.
7.2 Each party irrevocably submits to the exclusive jurisdiction of the state and federal courts located in the State of [Governing Law State] to settle any dispute or claim arising out of or in connection with this Agreement.
IN WITNESS WHEREOF, the parties have executed this Guarantee and Indemnity Agreement as of the date first written above.
GUARANTOR
Name: [Guarantor Name]
Address: [Guarantor Address], [Guarantor City], [Guarantor State] [Guarantor ZIP]
ACKNOWLEDGED AND ACCEPTED BY THE CREDITOR
Name: [Creditor Name]
Address: [Creditor Address], [Creditor City], [Creditor State] [Creditor ZIP]
Guarantor
________________
Signature
Creditor
________________
Signature
What Is a Guarantee and Indemnity Agreement?
A Guarantee and Indemnity Agreement in the United States secures a debt or duty by making the guarantor liable should the principal obligor fail to perform.
The guarantee component is a secondary obligation governed by state suretyship law and the principles set forth in the Restatement (Third) of Suretyship and Guaranty. As a secondary obligation, it depends on the existence and enforceability of the underlying debt — if the principal obligation is void or unenforceable, the guarantee may also fail. This is where the indemnity becomes critical: as a primary, independent obligation, the indemnity survives even if the underlying transaction is found to be invalid, giving the creditor recourse in virtually all circumstances.
The Statute of Frauds, adopted in some form in all fifty states, requires that a promise to answer for the debt of another must be in writing and signed by the party to be charged. This writing requirement is one of the most fundamental principles in U.S. surety law. The "main purpose" or "leading object" exception permits enforcement of oral guarantees where the guarantor's primary motivation is to serve their own economic interest, but this exception is narrow and fact-specific. Prudent creditors always require a written guarantee.
Under UCC Article 3, which governs negotiable instruments, accommodation parties (those who sign instruments to benefit another party) have specific rights and liabilities. Where the guaranteed obligation involves a promissory note or other negotiable instrument, UCC Article 3 provisions interact with common law suretyship principles to determine the guarantor's rights and defenses.
When Do You Need a Guarantee and Indemnity Agreement?
A Guarantee and Indemnity Agreement is commonly required in U.S. commercial lending transactions where the borrower is a corporation, LLC, or other entity with limited liability. Banks and commercial lenders routinely require personal guarantees from the entity's principals — owners, directors, officers, or shareholders — before extending credit. The SBA (Small Business Administration) loan program, for example, requires personal guarantees from anyone owning 20% or more of the business applying for an SBA-backed loan.
Commercial landlords frequently require personal guarantees when leasing space to newly formed entities or businesses without established credit histories. The guarantee ensures that the landlord has recourse against a creditworthy individual if the tenant entity defaults on rent or other lease obligations. In franchise agreements, franchisors typically require the franchisee's principals to guarantee the franchise obligations personally.
Trade creditors and suppliers may require guarantees from company directors or owners before extending trade credit or offering favorable payment terms. In merger and acquisition transactions, buyers may require sellers to guarantee certain representations and warranties or indemnification obligations that survive the closing. Construction projects often involve performance guarantees from parent companies supporting subsidiary contractors.
The indemnity component becomes particularly valuable in complex commercial transactions where the underlying obligation may be subject to legal challenge. If a court finds that the principal loan agreement or contract is unenforceable due to illegality, lack of capacity, or some other deficiency, the guarantee would ordinarily fall with it. However, the indemnity — as an independent primary obligation — survives such a finding and provides the creditor with continued protection.
What to Include in Your Guarantee and Indemnity Agreement
The identification of parties must include the full legal names, addresses, and entity types of the creditor, principal debtor, and guarantor. For entity guarantors, the agreement should reference the authorizing resolution or consent. Individual guarantors should acknowledge that they have reviewed the principal debtor's financial statements and understand the nature and extent of the guaranteed obligations.
The guarantee clause must clearly identify the guaranteed obligations by reference to the underlying agreement, specify whether the guarantee is limited or unlimited in amount, and state whether it is a continuing guarantee covering future obligations or is limited to specific existing obligations. Under most state laws, ambiguity in the scope of a guarantee is construed against the creditor, making precise drafting essential.
The waiver of suretyship defenses is a critical element in U.S. guarantee practice. The guarantor should explicitly waive defenses including: the right to require the creditor to proceed first against the principal debtor (the defense of marshaling or discussion); defenses based on impairment or release of collateral; defenses arising from modification of the principal obligation; defenses based on the release of co-guarantors; and any defense based on the creditor's failure to give notice of default. These waivers must be clear and conspicuous to be enforceable, and some states require specific language for certain waivers.
The indemnity clause must clearly establish itself as a separate, primary obligation independent of the guarantee. The agreement should specify the demand and notice procedures, including the form of demand, the required notice period, the method of delivery, and the time within which the guarantor must pay. The governing law clause should identify the applicable state law, and the agreement should include representations, warranties, and a severability provision to protect against partial invalidity.
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year = {2026},
howpublished = {\url{https://forms-legal.com/usa/financial/loans/guarantee-and-indemnity}},
note = {Free legal document template. Based on Uniform Commercial Code (UCC §3)}
}Also available for these jurisdictions:
Frequently Asked Questions
A guarantee and indemnity is an agreement in which one party promises to be responsible for the obligations or losses of another, commonly used to secure a debt or contract performance. A guarantee is a promise by the guarantor to fulfill the obligations of a borrower or other party if that party fails to do so, such as guaranteeing repayment of a loan or performance of a lease; the guarantor's liability is generally secondary, arising when the primary party defaults. An indemnity is a broader promise to compensate another party for losses or liabilities, often a primary obligation that can apply regardless of another party's default. The two are frequently combined, especially in lending and commercial contexts, where a guarantor both guarantees the primary party's obligations and indemnifies the beneficiary against losses. Because a guarantee and indemnity can create significant personal or corporate liability, the guarantor should understand the extent of the commitment. The agreement should clearly define the obligations guaranteed, the scope of the indemnity, and any limits. A guarantee and indemnity provides the beneficiary with security by making the guarantor responsible for the covered obligations or losses.
The difference between a guarantee and an indemnity lies in the nature and extent of the obligation. A guarantee is a secondary obligation: the guarantor promises to fulfill another party's obligation only if that party defaults, so the guarantor's liability depends on and is generally limited to the primary party's liability. An indemnity, by contrast, is typically a primary and independent obligation: the indemnifier promises to compensate the beneficiary for specified losses or liabilities regardless of whether another party has defaulted, and the indemnity can be broader and survive situations where a guarantee might fail, such as if the underlying obligation is unenforceable. Because an indemnity stands on its own, it often provides stronger protection to the beneficiary than a guarantee alone, which is why lenders and parties frequently require both. The distinction matters for the guarantor or indemnifier, since an indemnity can impose wider liability. Understanding whether an obligation is a guarantee or an indemnity helps a party assess the extent of their commitment. A combined guarantee and indemnity gives the beneficiary the security of both a backup promise and an independent obligation to cover losses.
A guarantee generally needs to be in writing to be enforceable, because the statute of frauds in every state requires that a promise to answer for the debt or obligation of another person be evidenced by a signed writing. This means an oral guarantee to pay someone else's debt is typically unenforceable, and the guarantor must sign a written guarantee for the beneficiary to enforce it. The writing should identify the obligation guaranteed, the parties, and the terms of the guarantee. An indemnity may or may not fall under the statute of frauds depending on the circumstances and the state, but reducing both guarantees and indemnities to writing is the safe and standard practice, since written agreements are far easier to enforce and prove. Because the statute of frauds bars enforcement of an oral promise to answer for another's debt, a guarantee should always be in writing and signed by the guarantor. A written guarantee and indemnity ensures the beneficiary can enforce the guarantor's commitment, which is why these agreements are documented in writing in lending and commercial transactions.
The risks of signing a guarantee and indemnity are significant, because the guarantor or indemnifier takes on responsibility for another party's obligations or for specified losses, which can lead to substantial personal or business liability. By guaranteeing a debt or obligation, the guarantor may have to pay if the primary party defaults, potentially the full amount of the debt plus interest and costs, and a personal guarantee can put the guarantor's personal assets at risk. An indemnity can be even broader, requiring the indemnifier to cover losses or liabilities regardless of another party's default, and may not be limited to a specific amount unless the agreement caps it. The liability can continue for a long time and may be triggered by circumstances the guarantor did not anticipate. Because these commitments can be far-reaching, the guarantor should carefully review the scope, any limits, the duration, and the conditions that trigger liability before signing, and consider negotiating caps or limits. A guarantee and indemnity should not be signed lightly, since it exposes the guarantor to real financial risk, and legal advice is advisable for significant guarantees, particularly personal guarantees that risk personal assets.
A guarantor can often limit their liability through the terms of the guarantee and indemnity, and negotiating such limits is advisable given the potential exposure. Possible limitations include a cap on the maximum amount the guarantor can be required to pay, a time limit on how long the guarantee remains in effect, limiting the guarantee to specific obligations rather than all of the primary party's debts, and requiring the beneficiary to pursue the primary party or any collateral first before claiming against the guarantor. The guarantor may also negotiate the right to be released under certain conditions or to receive notice of the primary party's default. Whether these limits are available depends on the bargaining position of the parties and what the beneficiary will accept, since lenders often prefer broad, unlimited guarantees. Because an unlimited guarantee exposes the guarantor to substantial risk, seeking to cap the amount, limit the duration, or narrow the covered obligations can meaningfully reduce the exposure. A guarantor considering a guarantee and indemnity should review the scope and negotiate limits where possible, ideally with legal advice, to control the liability they are accepting.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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