Parent Company Guarantee Agreement

Developers often try to ensure that PCGs are on terms that offer more than a pure guarantee and try to create both a guarantee and a compensation for the deposit. Contractors, on the other hand, will endeavour to limit the development to the parent company`s obligations by a simple bond. Recent experience shows some nervousness in the contracting market, which has led to an abandonment of the availability of offsets for a large number of projects for parent companies. In the literal sense of the word, a PCG is a contractual promise to ensure that the guaranteed party meets its contractual obligations. A guarantee is a contractual agreement that creates a secondary obligation to ensure the performance of a primary obligation. The bond obligations depend on the underlying contract. To return to a construction scenario in which a guarantee is granted to the contractor, the guarantor has no larger debts than the contractor in the construction contract. In addition, the warranty ends when the underlying construction contract is terminated, invalid or ceases. JCT Design and Build 2016 authorizes the employer to terminate the construction contract and recover certain losses if the contractor becomes insolvent. A bankruptcy therefore does not constitute a contractual breach and, since these explicit provisions must be included in the PAC, to ensure that the surety is required to guarantee the losses that an employer may suffer in these circumstances. Compensation creates the primary obligation to ensure that one party`s obligation to another party is met. Compensation is independent of the underlying contract and, therefore, generally survives termination, nullity or termination of the underlying contract. Section 4 of the 1677 Fraud Statue requires that the guarantees be signed in writing and by the surety or by a person authorized by the surety.

It is interesting to note that the courts have a progressive view of what is written and signed by the guarantor, so that an e-mail exchange may suffice (Golden Ocean Group Ltd -v- Salgaocar Mining Industries PVT Ltd and another [2012] EWCA Civ 265). However, in order to be safe and avoid costly and unnecessary discrepancies, it is recommended that all warranty conditions be defined in a signed printed document. In this context, it is important to be aware of the problems that may arise when applying pure safeguards and to ensure that the GCPs provide the protection and value that the parties want. It is in this spirit that we must take into account our five most important themes. As noted above, the basic rule is that the liability of the surety is equal to and not greater than that of the party guaranteed under the underlying contract.