What is the difference between an indemnity and a guarantee ?
- An indemnity constitutes a primary liability.
- A guarantee constitutes a secondary liability.
- A guarantee must be in writing or evidenced in writing and signed by the guarantor or its agent
- There are no formal requirements for a valid indemnity.
- The secondary nature of the liability under a guarantee means that if the tenant’s covenants are void or unenforceable, then the guarantee will also be unenforceable and if the tenant is discharged from its liability (other than by disclaimer where the guarantor’s liability continues), the liability of the guarantor will also be discharged.
- The primary nature of the liability under an indemnity means that, if the underlying transaction is set aside for any reason or the main debtor is discharged from their liability, the indemnity will remain valid.
For additional commercial law advice or specific advice on issues regarding liability for guarantees or indemnities or joint and several liability, solicitors in London can guide and assist.