A recent decision of the High Court has served as a useful
reminder and warning to parties of the need to carefully draft
contracts of suretyship, and the distinction between indemnities
(primary obligations) and guarantees (secondary obligations).
In Ultrabank A/S v Jagatramka [2017]
EWHC 2792 (Comm), Mr Justice Teare held that the language used in
the contract was indicative of a primary liability and that it
provided for an on demand bond which required the defendant to pay
a sum to the claimant equal to that which his company was
indebted.
The difference between suretyships of guarantee, and
suretyships of indemnity
- A guarantee is a promise to ensure
that a third party fulfils its obligations and/or a promise to
fulfil those obligations if that third party fails to do so. It is
a contractual agreement that creates a secondary obligation to
support a primary obligation of one party to another. The guarantor
promises that the borrower will perform its
