Guarantee, Termination
To: (Holder of Guarantee)
Dear ____________:
This notifies you formally of our termination of our Guarantee, effective immediately, related to our Guarantee, a copy of which is enclosed, and was given to you by us pursuant to which we guaranteed the ongoing obligations of __________________ (Name).Please accept this letter as formal notification to you that I am terminating all future obligations under the Guarantee effective as today’s date, under this Guarantee and any other (s) you may be holding relating to this matter.
This termination notice is given to you in accordance with the terms and conditions of the
Guarantee.Yours very truly,
_______________ Date: _________________
Maker of Guaranteecc Person or Entity whose obligations were guaranteed.
Exhibit 1: Copy of Guarantee
Guarantee, Termination
Review ListThis review list is provided to inform you about the document in question and assist you in its preparation. Terminating your guarantee only limits your liabilities from the date received by the party who has your guarantee. Therefore, you must send it by registered mail, by courier with signature required, or by a recognized overnight delivery service by a firm such as FedEx.
You should only take this action if you believe the party whose debt you are guaranteeing will continue to make payments against the guarantee outstanding and the party holding the guarantee will not just use this to call the debt and therefore put you back in the same place you were before, except matters may be even worse now if you have triggered a default on the matter.
These terminations are usually used by principals in businesses who no longer have those roles and whose guarantees were secondary, or good faith, guarantees of the debts in question. In these instances, the Termination can be very helpful over the long term to extricate you from these contingent liabilities. I have made use of this approach effectively in the past when selling a business or transferring management roles to another party.
The key cautionary note is to avoid taking this action if you believe it will trigger a default which, in turn, will weaken the original party and put your guarantee front and center for collection by the holder of your guarantee. Watch out for this boomerang problem.
Frequently Asked Questions
What is a guarantee termination letter?
A guarantee termination letter is a formal notification used by a guarantor to terminate their obligations under a guarantee. It states that the guarantor is terminating all future obligations under the guarantee effective immediately. The letter is given in accordance with the terms and conditions of the guarantee.
How do I write a guarantee termination letter?
To write a guarantee termination letter, address it to the holder of the guarantee, clearly state that you are terminating the guarantee effective immediately, and reference the enclosed copy of the guarantee. Include the name of the person or entity whose obligations were guaranteed, sign and date the letter, and send it according to the required method. The letter should also mention that termination is in accordance with the terms of the guarantee.
When does a guarantee termination become effective?
A guarantee termination becomes effective from the date it is received by the party who holds the guarantee. Therefore, it is important to send the termination notice using a method that provides proof of delivery. The termination only limits liabilities from that date forward.
What is the best way to send a guarantee termination letter?
The best way to send a guarantee termination letter is by registered mail, by courier with signature required, or by a recognized overnight delivery service. These methods provide proof of delivery and help establish the effective date of termination. Sending by ordinary mail may not provide the necessary documentation.
Does terminating a guarantee release me from all obligations?
Terminating a guarantee only limits your liabilities from the date the termination is received by the party who has your guarantee. It does not release you from obligations that arose before that date. Future obligations under the guarantee are terminated effective immediately upon receipt.
Who should receive a copy of the guarantee termination letter?
The original guarantee termination letter should be sent to the holder of the guarantee. Additionally, a copy should be sent to the person or entity whose obligations were guaranteed, as indicated by the 'cc' in the letter. This ensures all relevant parties are informed of the termination.
What should be included in a guarantee termination letter?
A guarantee termination letter should include the date, the name of the holder of the guarantee, a clear statement of termination effective immediately, reference to the enclosed copy of the guarantee, and the name of the person or entity whose obligations were guaranteed. It should also state that the termination is in accordance with the terms and conditions of the guarantee. The letter must be signed and dated by the maker of the guarantee.
Can I terminate a guarantee at any time?
The ability to terminate a guarantee depends on the terms and conditions of the guarantee itself. The termination notice must be given in accordance with those terms. It is advisable to review the guarantee to ensure that termination is permitted and to follow any specific procedures required.
What is the purpose of a guarantee termination review list?
The guarantee termination review list is provided to inform you about the document and assist in its preparation. It highlights important considerations, such as the effective date of termination and the recommended methods of delivery. This helps ensure that the termination is properly executed and documented.
What happens if I don't send the termination letter by a traceable method?
If you do not send the termination letter by a traceable method, such as registered mail, courier with signature required, or recognized overnight delivery, you may not have proof of when the termination was received. Since termination only limits liabilities from the date received, this could result in continued liability for obligations after the intended termination date. Therefore, using a traceable delivery method is strongly recommended.
