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Agreements between multiple parties can be a complex area to navigate. A Deed of Guarantee & Indemnity can be useful in order to help parties avoid future disputes by allowing a party to guarantee that the obligations of another party will be met.Â
But what is a Deed of Guarantee & Indemnity and what does it do for you?
Here’s what you need to know.
What Is A Deed Of Guarantee & Indemnity?
A Deed of Guarantee & Indemnity is a document signed by parties in order to confirm that one of the parties to a contract will guarantee the performance of one of the other parties.
An easy example for this is in the context of loans, where one party will guarantee that another party repays a loan by a certain date, otherwise they will repay it for them.
When Do I Need A Deed Of Guarantee & Indemnity?
A Deed of Guarantee & Indemnity can be useful for you in a number of situations. For example, you may look at getting one if you are lending money to a company and wish to ask the director to personally guarantee that they will cover the loan if their company is unable to at the date of repayment.
It is a method of ensuring that you will be repaid even in the event of the borrower being unable to make payment.
In its most general sense, though, a Deed of Guarantee & Indemnity will be useful when you are looking for assistance in obtaining funding or services which you may otherwise have a hard time getting, based on capital.
Why Is A Deed Of Indemnity Important?
A Deed of Indemnity is important for businesses because it affords protection for liability, which can often lead to the downfall of a business.
A director has a number of duties under the Corporations Act 2001, so having a good Deed of Indemnity can provide additional protection for their liability if things go wrong.
What Are The Benefits Of A Deed Of Indemnity?
Liability is often the kind of thing that scares employees away. However, having a Deed of Guarantee and Indemnity reassures you that things are under control, and you have a safety net.
This way, you can keep your liability in check while also incentivising people to stay with your company.
A Deed of Guarantee can also ensure that your company can successfully secure loans which may be essential to carrying out your business activities and achieving your goals. This kind of guarantee can mean one less headache!
What Is Included In A Deed Of Guarantee & Indemnity?
A Deed of Guarantee & Indemnity typically includes clauses regarding:
- Details of what is being guaranteed
- Indemnity
- Releases
What Are Some Limitations Of A Deed Of Indemnity?
While a Deed of Indemnity is common for its benefits, it also has its limitations. It’s important to balance its benefits with its limits before you decide that it’s right for your business.
The Corporations Act actually sets out a number of limits to indemnity. For example, if a director breaches one of their directors’ duties, a Deed of Indemnity can’t always come to the rescue. The director will still be held liable.
This is also the case for other obligations under the Corporations Act 2001. If you’re not too sure which may apply to you, it’s worth chatting to a lawyer who can advise you on the legal issues that may arise for your business. Our team is happy to help!
Need Help?
A good lawyer will be able to draft your Deed of Guarantee & Indemnity to ensure that the agreement is clearly set out for all parties involved, and that you are protected if a dispute arises.
At Sprintlaw, we focus on drafting comprehensive, easy to understand and user-friendly agreements for businesses.
Feel free to get in touch with us to get things started with your Deed of Guarantee & Indemnity! Our friendly team can be reached at 1800 730 617 or at team@sprintlaw.com.au for a free, no-obligations consultation.
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