A guarantee is **secondary** — it depends on the underlying obligation and can fall away with it. An indemnity is a **primary** obligation that survives. Serious documents contain both. In the UAE there is a further practical point: personal guarantees are frequently supported by **post-dated cheques**, and that changes the enforcement picture entirely.
Guarantee and Indemnity
Given by [GUARANTOR] in favour of [BENEFICIARY]
A guarantee is secondary — it depends on the underlying obligation and can fall away with it. An indemnity is a primary obligation that survives. Serious documents contain both. In the UAE there is a further practical point: personal guarantees are frequently supported by post-dated cheques, and that changes the enforcement picture entirely.
| Item | Detail |
|---|---|
| Guarantor | [NAME], [Emirates ID / passport] [NUMBER] |
| Beneficiary | [NAME], licence [NUMBER] |
| Principal debtor | [NAME], licence [NUMBER] |
| Guaranteed obligations | [THE FACILITY, LEASE OR SUPPLY AGREEMENT DATED ______] |
| Limit of liability | AED [AMOUNT] plus interest and costs — or state "unlimited" if genuinely intended |
| All monies guarantee? | [Yes — covers future obligations / No — limited to the stated agreement] |
| Duration | [Until discharged / Until ______] |
| Cheques given as security? | [Y/N] — see Section 6 |
| Independent advice taken | [DATE] |
| Language | [English / Bilingual — Arabic prevails onshore] |
| Governing law | [Emirate of ______ / DIFC / ADGM] |
1. Guarantee
1.1The Guarantor irrevocably and unconditionally guarantees the due performance by the Principal Debtor of the Guaranteed Obligations.
1.2If the Principal Debtor fails to pay any sum when due, the Guarantor shall pay on written demand as if it were the principal obligor.
1.3The Guarantor’s liability under this Clause is limited to AED [AMOUNT], together with interest and reasonable enforcement costs.
2. Indemnity
2.1As a separate and independent primary obligation, the Guarantor indemnifies the Beneficiary against any loss arising where a Guaranteed Obligation is or becomes unenforceable, invalid or illegal, or is otherwise not recoverable from the Principal Debtor.
2.2The amount recoverable shall not exceed what would have been recoverable under Clause 1 had the obligation been enforceable.
2.3Clause 2 exists because a guarantee can be discharged by events outside the guarantor’s control — a variation, a defect in the principal obligation, the debtor’s incapacity. It is not duplication.
3. Preservation
3.1This guarantee is a continuing security extending to the ultimate balance owing.
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These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
A guarantee is secondary and depends on the underlying obligation; an indemnity is a primary obligation that survives a defect in it. A document containing only a guarantee can be defeated by a variation made without consent or a flaw in the principal contract.
Clause 3.2 means the guarantee survives variations, extensions and increases without the guarantor’s consent. Without such a clause a material variation would generally discharge it. Guarantors should ask for a cap or a consent requirement; beneficiaries should expect the request.
Personal guarantees in the UAE are frequently supported by undated or post-dated cheques. The treatment of dishonoured cheques was substantially reformed in 2022, with much enforcement now running through civil routes and a cheque capable of being treated as an instrument of execution. Confirm the current position rather than relying on the older criminal assumption or a vague sense that it no longer matters.
Record the number, amount, date and what it secures, and require return with written confirmation on discharge. Cheques given years ago and forgotten are a live liability, and recovering them is far harder than recording them.
Clause 6.3 requires return and written confirmation that none remain. This is the step guarantors most often skip, and an unreturned security cheque surfaces long after the underlying obligation has gone.
It protects the guarantor by ensuring they understood, and the beneficiary by defeating later arguments about misunderstanding or pressure. For personal guarantees from directors, spouses and family members, this is close to essential.
A guarantee covering all present and future liabilities continues to cover facilities entered into years later, long after the guarantor stopped paying attention. Confining it to the identified agreement is the single most valuable change a guarantor can negotiate.
A director who guarantees a company facility and then leaves frequently remains bound for years. Building in release on departure, or a right to terminate as to future obligations, is worth more than most other protections combined.
Where a company guarantees the obligations of a parent or sister company, its managers must be satisfied the guarantee is in that company’s own interests. Upstream and cross-stream guarantees are the most often challenged, and the managers carry the exposure. Record the reasoning.
Clause 4.1 permits the beneficiary to come straight to the guarantor. Guarantors routinely assume the debtor and any security must be exhausted first. They need not be, unless the guarantee says so — which is why that protection appears in the Section 7 table.
Where a payment by the debtor is later avoided in its insolvency, the guarantor’s liability revives. A guarantor who believed the matter closed can find it reopened long afterwards.
Where several people guarantee, each is usually liable for the whole and the beneficiary chooses whom to pursue. A guarantor expecting to be liable only for their share should ask for several liability or an express right of contribution.
Where the guarantee exists in Arabic and English and is governed by onshore law, the Arabic governs. Signing an Arabic text you cannot read, which will prevail over the English you can, is the most avoidable risk in UAE contracting.
Could you actually pay this tomorrow? Guarantees are given optimistically at the start of a relationship and called in at the worst point of it. The exposure should be one the guarantor could survive.
Reflects UAE law and practice current as of {{DATE OF USE}}. **The treatment and enforcement of dishonoured cheques changed materially in 2022 and continues to develop.** The law on guarantees, notarisation requirements and DIFC and ADGM positions all change — take UAE legal advice before giving or relying on a material guarantee, on either side.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.