This blog post explores the different ways of drafting
guarantees and how this interacts with the obligations of parties
within the shipping industry.
What is a guarantee?
A contract of guarantee is an undertaking given by one party
(the guarantor) to another party (the beneficiary) to pay the
principal obligor's debts or to perform their obligations set
out in the underlying contract. A guarantor has a secondary
obligation to the beneficiary and therefore the guarantor will
typically only be obliged to act where there has been a breach of
the underlying contract. Whilst the commercial reasons behind a
guarantee are often straightforward, the use of the word
"guarantee" including the fact that the term
"guarantee" is also frequently used to refer to other
arrangements, such as contracts of indemnity (the difference
between these terms is explored further below), and the differing
ways in which guarantees are drafted, often leaves scope for
ambiguity. Such
