Description

Guaranty (Short Form)

Summary

This Guaranty is a short form guaranty of monetary and non-monetary obligations in a commercial transaction. Such commercial transactions may include a sale of goods transaction where the buyer is granted credit by the seller. Another commercial transaction may include a business collaboration where one party borrows money from a second party. Further, a commercial transaction may include a service engagement where one party agrees to provide services to a second party. The guaranty is given:

• For the account of the party in the transaction who is the borrower, debtor, or service provider (the obligor).
• In favor and for the benefit of the other party in the transaction who is the lender, creditor, or service recipient (the beneficiary).
• By a creditworthy individual or corporate entity, generally a principal, parent company, subsidiary, or affiliate of the obligor (the guarantor).

Details

A guaranty:

• Creates the guaranty obligation of the guarantor.
• Waives defenses to the guaranty obligation.
• Sets out the rights and obligations of the parties.

Guaranties vary in format, length, and complexity depending on a variety of factors, such as:

• The relationship between the parties to the commercial transaction.
• The size and nature of the transaction and the obligations.
• The creditworthiness of the obligor.
• The allocation of warranty and other responsibilities.

Assumptions Used in This Guaranty

This Guaranty assumes that:

• There is only one guarantor. Guaranties made by more than one guarantor are usually joint and several obligations of the guarantors. As such, each guarantor’s obligation covers the whole amount of the underlying obligations.
• This guaranty is used with a commercial transaction and not for a bank loan financing or real estate lease.
• This guaranty is secured by a pledge of assets of the guarantor.
• The obligor is a US company and the commercial transaction takes place in the US. If any party is organized or operates in, or any part of the transaction takes place in a foreign jurisdiction, these terms may have to be modified to comply with applicable laws in the relevant foreign jurisdiction.

State Laws

If the guarantor is an individual, state laws may impact personal guaranties. These laws generally favor guarantors. For example, California provides strong protections for guarantors. Case law also tends to favor the interests of guarantors over the interests of beneficiaries. The law governing guaranties varies from state to state and is beyond the scope of this Guaranty. Companies must therefore ensure their guaranty complies with relevant state law.