Drafting Effectively - Guarantees

Guarantees: One of the Most Litigated Forms of Documents

• Mainstream ‘market’ guarantees vs other guarantees

• Why are bank standard forms used?

• Why are guarantor standard forms used?

• What are the pitfalls in using standard forms?

• What can go wrong when negotiating standard forms?

• What difficulties arise in practice when confronted with an unfamiliar guarantee document?

• What gives rise to drafting errors?

• How this shapes the guarantees approach

• Case law examples - Triodos Bank NV v Dobbs

Using Guarantees as a Form of Insurance: Improving Drating and Negotiation Approaches

• The role of a guarantee in a transaction

• The insurance comparison

• Why do people take out insurance?

• Why do businesses take out insurance?

• What’s hidden/missing in the insurance small print?

• What’s hidden/missing in the guarantee small print?

• Acquiring an eye for detail – the insurer and the insured’s mindset

• The six-billion-dollar question for all guarantees

Why is There Never a One-Size-Fits-All Guarantee?

• What are the main types of guarantees?

• How they differ

• When a ‘guarantee’ is not a guarantee – why it’s what it says on the tin that matters – understanding ‘guarantee jargon’

• Why understanding different guarantee types is important for drafting purposes

Questions You Must Consider Before Drafting or Reviewing any Guarantee

• Examining the commercial rationale for guarantees and how that could affect your drafting

• Considerations when examining the scope of a guarantee

• Suitability of the guarantor – key issues

• Testing the limits – how far does a guarantee stretch & what are its limits? The principles from Holme v Brunskill & issues of the purview

• ‘Best before’ dates – do you know when a guarantee may be worthless?

• Competing interests

• How might other documents impact?

• Taxing issues and the question of set-off

• Down at the bureau de change – why currency matters

• Guarantee amendments

• When is a release a release? Wulff v Jay and other cases

• Alternative methods of comfort – are they of any use?

Should You Consider a Guarantee Term Sheet?

• What’s the purpose of a term sheet – why could it help with guarantees?

• Guarantees on non-financial transactions

• What could a guarantee term sheet look like?

• How a term sheet helps through the drafting and negotiation process

• Arguments for not having a guarantee term sheet

Reviewing Guarantees: Drafting Bear Traps

• Who is drafting?

• What document are you starting with?

• Recitals – why might they be important?

• Definitions

• The guarantee clause itself

• Guarantor rights & defences (including  First National Finance v Goodman )

• Joint and several liabilities –  Ellis v Emmanuel

• Duration and Discharge

• Liability caps -  Re Rees Ex p. National Provincial Bank of England

• Making a claim – examining the hoops to jump through

• Preserving rights under the guarantee

• Immediate recourse

• Continuing obligation language

• Double recovery

• Enforcement - Governing law and jurisdiction -  Ms X v. Banque Privée Edmond de Rothschild

• Unfair Contract Terms Act 1977

• Resurrection of guarantees

The Impact of Other Documents/Transactions on Guarantees

• Other guarantees

• Security

• Intercreditor and priority agreements

• Facility agreements

• Other agreements

Distinguishing Between Legal and Commercial Risk in the Context of Guarantees

• What’s my remedy?

• Legal factors affecting the remedy

• Commercial factors affect the remedy

• The crystallisation of legal risk into economic loss

Please be advised that this training course does not constitute legal advice & should not be relied upon as such. Nor can the trainer give legal advice to participants during the sessions.

Training Objectives

• Understanding why guarantees are so often the subject of litigation

• How looking at guarantees as a form of insurance helps the approach to drafting and negotiation elements

• Determine that there is never a one-size-fits-all guarantee

• Considerations of a guarantee term sheet

• Necessary questions to consider before drafting or reviewing any guarantee

• Getting to grips with guarantee jargon – guarantee vs. undertaking vs. indemnity

• Discover significant bear traps in guarantee drafting

• Determine the impact of other documents/transactions on guarantees

• Distinguishing the legal and commercial risk of guarantees

Case law and exercises may be used to highlight particular issues.

Sessions are not a clause-by-clause page turn of a guarantee. By examining fundamental drafting principles and how guarantees fit together commercially, training helps you acquire core key principles to apply and adapt to different guarantee scenarios.

Training Course Summary

Guarantees are one of the most litigated forms of documents. With increased pressure on lawyers to provide even more excellent value for money, understanding how to draft guarantees effectively is a crucial part of every banking & finance lawyer’s toolkit. Sessions are essential for lawyers involved in reviewing, negotiating, and drafting changes to guarantees, whether working for lenders or other commercial parties. Training is aimed at lawyers looking to better understand guarantee mechanics, improve drafting skills and negotiate effectively with greater confidence. It’s also aimed at lawyers wishing to explain the impact of guarantee drafting in plain English - a vital skill in the 21st century. This course is suitable for individuals requiring a refresher on the principles of guarantee drafting.