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Guarantee Facility Agreement for the United Kingdom

Guarantee Facility Agreement Template for England and Wales

A Guarantee Facility Agreement under English and Welsh law is a legally binding contract where one party (the guarantor) agrees to provide guarantees up to a specified limit in support of obligations owed by another party (the principal debtor) to a beneficiary. The agreement sets out the terms under which guarantees can be issued, including conditions precedent, representations and warranties, and enforcement mechanisms. It is commonly used in commercial financing arrangements and is governed by both statute and common law principles under the jurisdiction of England and Wales.

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Guarantee Facility Agreement

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What is a Guarantee Facility Agreement?

The Guarantee Facility Agreement is a crucial financing instrument in commercial transactions under English and Welsh law. It provides a framework for issuing multiple guarantees within a pre-agreed facility limit, offering flexibility for ongoing business needs. This document is particularly valuable when a party requires regular guarantee support for various commercial obligations, such as tender bonds, performance bonds, or payment guarantees. The agreement comprehensively addresses facility limits, conditions for issuance, fees, monitoring requirements, and enforcement mechanisms, while ensuring compliance with English law requirements for guarantees, including the Statute of Frauds 1677.

What sections should be included in a Guarantee Facility Agreement?

1. Parties: Identification of the guarantor, beneficiary, and principal debtor

2. Background: Context of the guarantee facility and underlying obligations

3. Definitions: Key terms used throughout the agreement

4. Guarantee and Indemnity: Core obligations of the guarantor

5. Facility Terms: Amount, duration, and conditions of the facility

6. Representations and Warranties: Statements of fact and assurances by the guarantor

7. Payments and Calculations: Payment mechanics and calculation methods

8. Enforcement: Rights and remedies upon default

9. Governing Law and Jurisdiction: Choice of law and dispute resolution provisions

What sections are optional to include in a Guarantee Facility Agreement?

1. Security Provisions: Additional security arrangements - include when security is being provided alongside the guarantee

2. Multiple Guarantors: Provisions for joint and several liability - include when there is more than one guarantor

3. Currency Provisions: Currency conversion and payment terms - include for cross-border or multi-currency facilities

4. Tax Gross-up: Provisions for tax-related payments - include when tax implications need to be addressed

What schedules should be included in a Guarantee Facility Agreement?

1. Form of Demand: Template for making demands under the guarantee

2. Conditions Precedent: Documents and conditions required before facility becomes effective

3. Guarantee Fee Schedule: Details of fees payable by the guarantor

4. Form of Compliance Certificate: Template for periodic compliance confirmations

5. Security Documents: List and copies of related security documents

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok成人版 | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Document Type

Finance Agreement

Cost

Free to use
Relevant legal definitions






















































Clauses































Industries

Statute of Frauds 1677: Section 4 requires guarantees to be in writing and signed to be enforceable. This is fundamental for the validity of any guarantee agreement.

Contracts (Rights of Third Parties) Act 1999: Governs whether and how third parties can enforce terms of the guarantee. Important for determining the scope of enforcement rights.

Unfair Contract Terms Act 1977: Regulates exclusion clauses and limitations of liability, particularly relevant for business-to-business contracts in guarantee arrangements.

Consumer Credit Act 1974: Applies when the guarantee involves individual guarantors or consumer relationships. Provides additional protections for consumer guarantors.

Financial Services and Markets Act 2000: Relevant if the guarantee facility involves regulated financial activities. Sets out regulatory framework for financial services.

Common Law Contract Principles: Covers fundamental elements including offer, acceptance, consideration, and intention to create legal relations.

Equitable Principles: Encompasses principles of undue influence, duress, and misrepresentation that could invalidate a guarantee.

FCA Regulations: Financial Conduct Authority regulations applicable when the facility provider is a regulated entity.

UK Corporate Governance Code: Relevant for guarantee facilities involving listed companies, setting out governance requirements.

Money Laundering Regulations 2017: Establishes KYC and due diligence requirements for parties involved in the guarantee facility.

Companies Act 2006: Governs corporate capacity, authority, and directors' duties in relation to providing or receiving guarantees.

Insolvency Act 1986: Determines the impact of insolvency on guarantees and the rights of parties in insolvency scenarios.

Banking Act 2009: Applicable when banks are involved in the facility, setting out specific banking-related requirements.

Enterprise Act 2002: Addresses competition law considerations in guarantee facility agreements.

Teams

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