Page 27 - Q&A 2019/2020

of the guarantee have been met, the guarantor is obliged to perform in full
as contracted. The liability of the guarantor under a guarantee is equal to the
amount which is guaranteed, whether or not the guarantee is called upon.
A guarantee can only be discharged if there is performance of the principal
obligation or payment on the part of the guarantor.
A guarantee does not have any formal requirements such as having to be
embodied in a written document, although it is strongly recommended to
record the terms of a guarantee in a valid written agreement.
Commercial A guarantee is therefore generally seen as a stronger form of security than a

surety which is accessory in nature as it establishes independent liability for the
principal obligation.
In your situation, if you are unsure about the terms of your bank’s security
arrangements for the financing by your company, consider discussing such
first with your attorney to ensure that you fully understand the personal security
requirements of the bank.

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