Letter of Guaranty

A Letter of Guaranty is a letter that is issued by a creditor before allowing a client (or debtor) to make purchases on account. It is also often used in conjunction with checks, in which case the bank will guarantee the funds will be available up to a certain amount. This document is another level of safety for people doing business with an individual or corporation.

Here is a sample Letter of Guaranty. Please edit the terms in [brackets].

GUARANTY

This Guaranty is made on [Date] (“Effective Date”) by [name of Guarantor], of [address] , [city] , County, [state] (hereinafter the "Guarantor"), to [Company A], a corporation organized and existing under the laws of [State], with its principal office located at [Address], (hereinafter the "Creditor").

RECITALS

A. [Name of Debtor] (hereinafter the "Debtor") desires to purchase goods from the Creditor and desires for the Creditor to extend credit to the Debtor for some or all of the purchases.

B. The Creditor is not willing to extend any credit or any further credit to the Debtor unless the Guarantor, the parent corporation of Debtor, enters into this Guaranty.

In consideration of the premises and for other good and valuable consideration, and to induce the Creditor to extend credit to the Debtor, the Guarantor agrees as follows:

SECTION ONE. GUARANTEE

1.1 The Guarantor hereby irrevocably, absolutely, unconditionally and without limitation guarantees: (i) the prompt payment by Debtor, as and when due and payable, of all amounts now or hereafter owing in respect of all those debts, extensions of credit, financial accommodations, and other amounts due from Debtor to the Creditor as a result of the Debtor's purchase of goods from the Creditor, plus interest at 1.5% on past-due amounts; and (ii) the payment to Creditor of any and all expenses incurred by the Creditor in enforcing its rights under this Guaranty;

1.2 In the event that Debtor shall for any reason fail to pay any amounts owed to Creditor as and when due and payable, the Guarantor will, upon demand by Creditor, pay such amounts in full to Creditor, including interest at 1.5% on past-due amounts.

1.3 This Guaranty is a continuing guaranty and shall continue in full force and effect until revoked by a notice of revocation received by Creditor at the above address or any other address notified to Guarantor; however, any revocation shall not affect liability for obligations guaranteed prior to Creditor’s receipt of notice of revocation.

1.4 This Guaranty shall inure, together with all rights and remedies of the Creditor, to the benefit of the Creditor and its respective successors and permitted assigns.

SECTION TWO. ENFORCEMENT

2.1 The Creditor may enforce the provisions of this Guaranty from time to time as often as occasion for such enforcement may arise.

2.2 This Guaranty is a guaranty of payment and not merely of collection. Creditor shall not be required to proceed against Debtor or any other person (including, but not limited to, the undersigned), or pursue any other remedy. Guarantor expressly waives any right it may have to assert any counterclaim or set-off.

SECTION THREE. MISCELLANEOUS

3.1 This Guaranty is delivered in [State] and shall be construed according to the laws of [State].

3.2 This Guaranty shall inure to the benefit of and be enforceable by the Creditor and its successors and assigns and shall be enforceable against and binding upon the Guarantor.

3.3 Section headings are for convenience only and are not intended to expand or restrict the scope or substance of the provisions of this Guaranty. Wherever used in this Guaranty, the singular shall include the plural, the plural shall include the singular, and pronouns shall be read as masculine, feminine or neuter as the context requires.

3.4 No failure on the part of the Creditor to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right preclude any other or further exercise thereof or the exercise of any other right.

GUARANTOR ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD ALL OF THE TERMS OF THIS GUARANTY. GUARANTOR HAS HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL OF ITS CHOICE AND IS NOT RELYING UPON, AND CREDITOR HAS NOT MADE, ANY REPRESENTATION OR PROMISE CONCERNING THE TERMS OF THIS GUARANTY, THE OBLIGATIONS, OR ANY OTHER MATTER BEARING ON GUARANTOR’S LIABILITY, OTHER THAN THOSE WHICH ARE EXPRESSLY CONTAINED IN THIS DOCUMENT.

GUARANTOR FURTHER ACKNOWLEDGES THAT IT IS SIGNING THIS GUARANTY OF ITS OWN FREE WILL AND VOLITION AND WITHOUT ANY DURESS OR COERCION.

IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by an officer thereunto duly authorized, as of the date first above written.

Guarantor: ______________________

By: ____________________________

Name: __________________________

Title: ____________________________