How do Guarantees & Indemnities Differ in Commercial Contracts?
A contracting party can seek to reduce its possible exposure for loss caused by breach of contract by requiring the other party or a third party to provide contractual promises in the form of guarantees or indemnities.
While they are common contractual clauses, particularly in commercial bargains, guarantees and indemnities are subject to special rules of interpretation and need to be drafted carefully.
Guarantees and indemnities can be used separately or together, and can also be used with other risk allocation clauses such as liquidated damages, exclusion, warranty and insurance clauses.