Aspects of Guarantee Clauses and Drafting

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1、ASPECTSOFGUARANTEECLAUSESANDTHEIRDRAFTINGNeilLevy,GuildhallChambersProfessorJohnPhillips,KingsCollege,London1.Thistalkwillfocusonkeyclausesregularlyfoundinmodernguaranteeforms,andthewayinwhichtheyhavebeeninterpretedbythecourtsinrecentcases.Inthispaperweconsiderfirstt

2、hegeneralapproachtakenbythecourtswheninterpretingguarantees,thenthefollowingspecificprovisions:a.clausesdefiningthescopeoftheguaranteedliabilitiesb.considerationclausesc.demandclausesd.principaldebtorclausese.conclusiveevidenceclausesf.clausesexcludingtheguarantor’sr

3、ightsg.continuingsecurityclauses,andh.terminationclauses.Interpretation12.Thenormalrulesofcontractualconstructionapplytowrittenguarantees.Applyingthose2principles,thecourtwillask“whatmeaningwoulditconveytoareasonablepersonhavingallthebackgroundknowledgewhichwouldreas

4、onablyhavebeenavailabletothepartiesatthe3timeofthecontract”?3.Thefactthattheguaranteeappearstohaveaclearmeaningonitsfacedoesnotprevent,or4excuse,thecourtfromlookingatthebackground.Soalthoughaguaranteeexpressedtoapplyto“thepriceofalltradegoodsthatyoumaysupply”wouldini

5、tsliteralmeaningonlyapplytogoodssuppliedaftertheguaranteewasgiven,havingregardtotheadmissiblebackground,thecourtconstruedtheguaranteeascoveringboththeexistingandfurtherdebtoftheprincipal5debtor.4.However,theadmissiblebackgroundexcludesevidenceofthepreviousnegotiation

6、softhe6partiesandtheirdeclarationsofsubjectiveintent.Soalthoughaguarantorhaddiscussionswiththecreditorsometwoyearsbeforegivingtheguaranteeinwhichhehadsaidhewouldnotbepersonallyliableforcertaindebtsofthedebtor,sincethosediscussionsweresimplynegotiationsanddidnotgiveri

7、setoacontractualagreement,theywerenotadmissiblein7construingthescopeoftheguarantee.Clausesdefiningthescopeoftheguaranteedliabilities5.Carefulconsiderationneedstobegiventothewordingusedintheclausedefiningthescopeoftheliabilitiescoveredbytheguarantee.Problemsfrequently

8、arisewhentheclauseisnotdraftedinsufficientlywidetermsorwithsufficientclaritytocoveraparticularliability.6.Thedangersofdefiningthesc