This is a professionally drawn, short agreement that brings in a guarantor to an existing contract.
It is most likely to be used when a client or customer misses a payment deadline for work that is performed in stages, and the contractor accordingly refuses to continue his own contractual obligations. The guarantor "rescues" the first party and the deal by guaranteeing payment.
The document includes an option to change the terms of payment should you so require. For example, the debtor may agree to an increased rate of default interest, or the creditor to extended payments or a different schedule of work against which payments are made. (If you make a change that affects the obligations of the creditor or debtor, the other parties must sign too. If that happens, no-one needs to sign the document as a deed.)
Examples of when you might use this document:
An entrepreneur borrows from a friend to start a new business. The loan requires monthly payments and the borrower fails to meet them. The borrower’s brother agrees to provide an “after the event” guarantee without change to the terms of the original agreement.
A website developer agrees to write a website for a new business. Before completion, the client decides to add a great deal more work. The developer become worried that the new business might not ever launch, so insists that the directors of the client company undertake payment for the enlarged contract. This agreement would include adding a new schedule to the original agreement, by reference, and a new schedule of payments.
A builder agrees to build a house against stage payments, but the client fails to make a payment after part of the work has been done. The builder threatens to walk out. The client persuades a family member to give an assurance of the debt as instalments become due. The builder agrees to complete the contract.Read More