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Guarantor In Loan Agreement for Canada

Guarantor In Loan Agreement Template for Canada

A Canadian Guarantor in Loan Agreement is a legally binding document where a third party (the guarantor) commits to fulfilling the borrower's loan obligations if the borrower defaults. This agreement, governed by Canadian federal and provincial laws, establishes the scope of the guarantee, the guarantor's obligations, and the circumstances under which the guarantee can be enforced. It includes specific provisions required under Canadian banking regulations and provincial contract laws, ensuring compliance with local legal requirements while protecting the interests of all parties involved.

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What is a Guarantor In Loan Agreement?

The Guarantor in Loan Agreement is a crucial document in Canadian lending practices, typically used when additional security is required for a loan beyond the primary borrower's creditworthiness. This agreement becomes necessary in various scenarios, such as business loans where personal guarantees from directors are required, real estate financing where family members may guarantee residential mortgages, or corporate financing where parent companies guarantee subsidiaries' obligations. The document must comply with both federal banking regulations and provincial contract laws, including specific requirements for written guarantees under provincial Statutes of Fraud. It outlines the guarantor's obligations, enforcement mechanisms, and any limitations on liability, while ensuring all parties' rights are protected under Canadian law.

What sections should be included in a Guarantor In Loan Agreement?

1. Parties: Identifies all parties to the agreement including the lender, borrower, and guarantor(s)

2. Background: Explains the context of the guarantee, including reference to the main loan agreement

3. Definitions: Defines key terms used throughout the guarantee agreement

4. Guarantee and Indemnity: Core section establishing the guarantee obligations and indemnification provisions

5. Extent of Guarantor's Liability: Defines the scope and limitations of the guarantor's obligations

6. Nature of Guarantee: Specifies that the guarantee is continuing, unconditional and irrevocable

7. Preservation of Rights: Establishes that the lender's rights against the guarantor are preserved despite various circumstances

8. Payments: Details how and when payments must be made by the guarantor

9. Representations and Warranties: Guarantor's confirmations about their capacity and authority to enter into the guarantee

10. Costs and Expenses: Allocation of costs related to the preparation and enforcement of the guarantee

11. Notices: Specifies how formal communications between parties should be made

12. Governing Law and Jurisdiction: Specifies that Canadian law governs and establishes jurisdiction for disputes

What sections are optional to include in a Guarantor In Loan Agreement?

1. Security: Include when the guarantee is secured by specific assets of the guarantor

2. Multiple Guarantors: Include when there is more than one guarantor to establish joint and several liability

3. Limited Recourse: Include when the guarantee is limited to specific assets or amounts

4. Corporate Guarantor Provisions: Include when the guarantor is a corporation, including specific representations and warranties

5. Guarantee Release Conditions: Include when there are specific conditions under which the guarantee may be released

6. Currency Provisions: Include when the loan and guarantee involve multiple currencies

7. Tax Gross-Up: Include when tax implications need to be addressed in the guarantee payments

8. Financial Covenants: Include when the guarantor must maintain certain financial conditions

What schedules should be included in a Guarantor In Loan Agreement?

1. Schedule A - Primary Loan Agreement: Copy or summary of the main loan agreement being guaranteed

2. Schedule B - Guaranteed Obligations: Detailed description of the obligations being guaranteed, including any specific limitations

3. Schedule C - Security Details: Details of any security provided by the guarantor (if applicable)

4. Schedule D - Guarantor Information: Key information about the guarantor including contact details and notice information

5. Appendix 1 - Form of Demand: Standard form for making a demand under the guarantee

6. Appendix 2 - Compliance Certificate: Form for periodic confirmation of compliance with guarantee terms (if required)

Authors

Alex Denne

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

Jurisdiction

Canada

Publisher

Ƶ

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions








































Clauses



































Relevant Industries

Banking & Financial Services

Real Estate & Property

Commercial Lending

Corporate Finance

Small Business & Entrepreneurship

Construction & Development

Manufacturing

Retail

Professional Services

Agriculture

Relevant Teams

Legal

Finance

Credit Risk

Compliance

Commercial Banking

Corporate Banking

Business Development

Treasury

Risk Management

Operations

Relevant Roles

Chief Financial Officer

Finance Manager

Credit Risk Manager

Legal Counsel

Corporate Lawyer

Loan Officer

Commercial Banking Manager

Credit Analyst

Compliance Officer

Business Development Manager

Account Manager

Corporate Secretary

Risk Assessment Officer

Treasury Manager

Industries








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