The guarantee is considered a fundamental legal tool to ensure the fulfillment of financial obligations in commercial and personal transactions. It is regulated by the UAE Federal Civil Transactions Law (Chapters 1056-1131), which defines its elements, types, and legal effects, ensuring clarity of rights and duties among the guarantor, creditor, and principal debtor, thereby enhancing justice in transactions. This article reviews the conditions of the guarantee, its types, effects, and termination methods.
Definition of Guarantee
A guarantee is a legal agreement that binds a person (the guarantor) to the obligations of another person (the debtor) to ensure the execution of financial or contractual obligations. Under the UAE Federal Civil Transactions Law, the guarantee is a mechanism that secures the rights of the creditor, as the guarantor commits to compensating the creditor in case the debtor fails to fulfill their obligations.
The Guarantor must be Capable: This means that the person guaranteeing the obligation must have sufficient financial resources to cover what is required in case the other person (the debtor) cannot fulfill it.
Importance of Guarantee
The guarantee plays a vital role in facilitating the execution of financial transactions and contractual obligations between creditors and debtors.
Ensures Obligation: It helps ensure that
individuals or companies fulfil their financial or legal
obligations.
Enhances Trust: It increases trust between parties
in transactions, facilitating the completion of deals.
Protects Rights: It provides legal protection for
the aggrieved party in case of non-fulfillment of the
obligation.
Facilitates Transactions: It makes commercial
procedures smoother and more secure.
Types of Guarantee
Immediate Guarantee: This means that the obligation of the guarantor will take effect immediately, without any conditions or delays.
Personal Guarantee: This means the guarantor is responsible for ensuring the debtor is present at the expiration date of the guarantee. If they fail to do so, the guarantor will bear the consequences, and a penalty may be imposed.
Financial Guarantee: This is a guarantee provided by the guarantor to pay the owed amount or execute the agreed-on financial obligations, ensuring the creditor's right to recover their dues if the debtor fails to comply.
Conditional Guarantee: This type of guarantee only becomes binding upon the fulfillment of a specific condition.
Suspensive Guarantee: This is a type of guarantee that is linked to a specific condition that must be fulfilled in the future before the obligation becomes binding.
Solidary Guarantee: This means that several guarantors share responsibility for the obligation. The creditor has the right to claim from any of the guarantors to recover the owed amount.
Specified Guarantee: This type of guarantee is limited to specific limits, either in terms of the financial amount or the type of obligation.
Effects of Guarantee
Assuming Responsibility: The guarantor is obliged to pay the owed amount or fulfill the obligation if the principal debtor fails to comply.
Protection of Creditor: It strengthens the rights of the creditor, ensuring they can recover their dues even if the debtor fails to comply.
Increasing Trust: The guarantee provides security in financial transactions, facilitating the execution of contracts and deals.
Impact on the Guarantor: The guarantee can affect the financial status of the guarantor, especially if the principal debtor fails to fulfill the obligation.
Legal Rights: The guarantor has the right to recover the paid amounts from the principal debtor in case of fulfilling the obligation.
Termination of Guarantee
The guarantee will be terminated in the following cases:
Payment of Debt: When the debt is paid or the obligation is fulfilled, the guarantor's responsibility ends.
Death of the Principal: If the principal debtor dies, the guarantee is terminated unless there is an agreement to the contrary.
Release of the Guarantor by the Creditor: If the creditor decides to exempt the guarantor from responsibility, the guarantee terminates.
The guarantee is a vital legal tool in organizing financial relationships, contributing to enhancing trust between parties. The Federal Civil Transactions Law in the UAE precisely defines the rights and obligations of the creditor, guarantor, and principal debtor, contributing to achieving justice and ensuring the fulfillment of obligations. This organization enhances the stability of financial and commercial transactions and protects the rights of all involved parties, helping to create a reliable legal environment conducive to investment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
