Indemnities and guarantees
Indemnities and guarantees are obligations that can have serious financial implications if they are triggered. Naturally, this makes them quite risky, and the advice of a legal specialist is often required.
Indemnities and guarantees are used in a variety of contracts and agreements, such as loans, business mergers, sales and acquisitions. Lenders in particular often ask for an indemnity or guarantee to reduce the risk of providing loans.
We advise organisations on the appropriate indemnities and guarantees to include in their commercial contracts and negotiate and draft agreements that meet their objectives. We also advise organisations and individuals about the potential consequences of entering into a contract which contains indemnities and/or guarantees and negotiate amendments on their behalf.
Disputes relating to indemnities and guarantees tend to arise when the obligations are ‘triggered’. In other words, when the pre-defined event occurs that requires the indemnity to be paid, or when the guarantor has failed to ensure something has occurred.
How we help you
- If an indemnity or guarantee is required, we are on-hand to guide you through the process and ensure you understand your obligations. Ideally, involve us before you sign the agreement, but we can also assist at any point afterwards.
- Indemnities and guarantees are often a feature of insolvencies, and SA Law’s extensive experience in this field will ensure that the indemnity or guarantee is used effectively and fairly.
It’s good to bear in mind...
- For an indemnity or guarantee to exist, it must be in writing. However, bear in mind that this doesn’t need to be a formal agreement. A chain of emails can create an enforceable guarantee.
- Indemnities and guarantees must be reasonable under the Unfair Contract Terms Act 1977. If one of the parties is a consumer, then the indemnity or guarantee must also be fair under the Unfair Terms in Consumer Contracts Regulations 1999.