What Is A Deed of Guarantee & Indemnity? (2026 Updated)

If you’re being asked to sign a Deed of Guarantee & Indemnity, it’s normal to feel a bit uneasy. It often shows up right when you’re trying to secure something important for your business - like a lease, a loan, a trade account, or a supplier agreement - and suddenly you’re being asked to “guarantee” someone else’s obligations.

The tricky part is that a Deed of Guarantee & Indemnity can create very real personal risk, even if you’re signing it “just to get the deal done”.

This 2026 update reflects current commercial practice in New Zealand (including how landlords, banks, and suppliers commonly structure guarantees today) and explains what you’re agreeing to in plain English, what to watch for, and how to negotiate sensible limits.

What Is A Deed of Guarantee & Indemnity?

A Deed of Guarantee & Indemnity (often shortened to “guarantee and indemnity” or “DGI”) is a legal document where you (the guarantor) agree to:

• Guarantee that another party (usually a company or an individual) will meet their obligations; and
• Indemnify the other party (usually a landlord, lender, or supplier) for losses if those obligations aren’t met.

In practical terms, it’s commonly used where the party signing the main agreement doesn’t have a strong credit history or enough assets (for example, a new company). The other side wants an extra layer of comfort that they’ll be paid or protected if something goes wrong.

Most often, a Deed of Guarantee & Indemnity is signed by:

• a director of a company;
• a shareholder of a company;
• a parent company (guaranteeing a subsidiary); or
• sometimes a spouse/partner or another related person (this can be a red flag and needs careful thought).

It’s called a deed because it’s intended to be more formal than a standard contract. In many situations, deeds can be enforceable even without “consideration” (the usual exchange of value required for contracts). That’s one reason they’re widely used for guarantees.

If you’re signing multiple business documents at once (like a lease plus a guarantee), it’s worth understanding the difference between a deed and an agreement - a quick way to get your bearings is to look at the difference between deed and agreement.

Guarantee Vs Indemnity: What’s The Difference (And Why It Matters)?

People often use the words “guarantee” and “indemnity” as if they mean the same thing. Legally, they don’t - and that difference can change how much risk you’re taking on.

What A “Guarantee” Means

A guarantee is usually a promise that if the main party (for example, your company) fails to perform its obligations, then you will step in and make good on them.

In many cases, a guarantee is “secondary” liability. That means the other side generally has to show the main party has defaulted before calling on the guarantor.

Example: Your company doesn’t pay rent under a commercial lease. The landlord then demands you (as guarantor) pay the outstanding rent.

What An “Indemnity” Means

An indemnity is often broader and can create “primary” liability. In plain terms, you’re promising to compensate the other party for certain losses, and the other party may not have to jump through the same hoops they would for a guarantee.

Indemnities can also cover losses that aren’t strictly a “debt” (for example, legal costs, enforcement expenses, or losses arising from breaches that are hard to quantify).

This is why deeds that combine both terms can be so powerful: you might be liable not only for unpaid amounts, but also for a wider range of costs and losses connected to the underlying agreement.

Why Businesses Use Both In One Document

From the lender/landlord/supplier’s perspective, a combined guarantee and indemnity:

• gives them multiple legal pathways to recover losses;
• reduces arguments about technicalities (for example, whether the main contract is still valid); and
• can make enforcement quicker and cheaper.

From your perspective, it means you should assume the document is high-risk unless limited and read it carefully before signing.

When Would You Need A Deed of Guarantee & Indemnity In NZ?

In New Zealand, you’ll most commonly see Deeds of Guarantee & Indemnity in situations where one party is taking on financial risk and wants extra security.

Commercial Leases

Landlords often require directors to personally guarantee a lease, especially if:

• your business is new and doesn’t have trading history;
• the tenant is a small company with limited assets;
• the lease term is long or has significant fit-out obligations; or
• there are high outgoings (rates, insurance, maintenance) bundled into the lease responsibilities.

If you’re signing a lease, the guarantee is usually linked tightly to what the lease says - so it’s smart to have the lease reviewed at the same time (not after). This is where a Commercial Lease Review can save you a lot of headaches later.

Bank Lending And Finance

Banks and private lenders commonly require personal guarantees from directors (and sometimes shareholders) for business lending. You might also be asked to provide security over personal assets, depending on the structure of the deal.

Sometimes, guarantees show up alongside other finance documents. For example, a lender might also require a General Security Agreement from the company, while asking you personally to sign a guarantee and indemnity.

Supplier And Trade Accounts

Suppliers may offer goods on credit (for example, “30 days end of month”) but ask for a director’s guarantee first. This is common in construction supply, wholesale, hospitality, and manufacturing.

Even if the credit limit looks small, the guarantee might not be limited to that amount unless you negotiate it. It may also cover interest, debt recovery fees, and ongoing supply.

Company Group Structures (Parent/Subsidiary)

If your business operates through multiple entities, it’s common for a parent company to guarantee a subsidiary’s obligations. This can be commercially sensible - but it still increases risk exposure across the group.

When you’re setting up or reorganising a group structure, the governing documents (like a Company Constitution) and any shareholder arrangements matter too, because they affect who controls decisions and who ultimately wears the risk.

What Are The Key Clauses To Watch Out For?

A Deed of Guarantee & Indemnity is rarely a “standard” document in the sense that it’s safe to sign without changes. Small wording differences can dramatically expand (or reduce) your liability.

Here are some of the most important clauses to look out for.

1. Scope: What Obligations Are You Guaranteeing?

Start by identifying exactly what the guarantee attaches to. Is it:

• one specific agreement (for example, a lease at a specific address);
• all amounts owed “from time to time” under a trading relationship; or
• any future variations, renewals, extensions, or replacements of the agreement?

A common risk is signing a guarantee that quietly covers future agreements, not just the one you’re dealing with today.

2. “All Monies” Clauses

Many guarantees use “all monies” wording. That generally means you’re on the hook for everything the primary party owes, including:

• principal amounts (rent, invoices, loan repayments);
• interest (sometimes at a default rate);
• fees and charges; and
• legal costs and enforcement costs.

If you’re thinking “I’m only guaranteeing a small credit limit,” double check - an “all monies” clause can be broader than you expect.

3. Duration: When Does The Guarantee End?

Some guarantees are limited to a fixed period. Others continue until the other party formally releases you (which may never happen automatically).

For leases, the guarantee may continue through:

• renewals or extensions;
• holdover periods (staying in the premises after the term ends); and
• assignment situations (where the lease is transferred to a new tenant).

If there’s any chance you’ll sell the business later, think ahead - your guarantee can become a major issue in a sale negotiation. It’s also why business sale transactions often include detailed completion steps to deal with releases, consents, and assignments.

4. Variations Without Consent

Many deeds state that the guarantee still applies even if the underlying agreement changes, even if you didn’t consent. That can include:

• rent increases or changes to outgoings;
• extensions to payment terms with the supplier;
• changes to the scope of services; or
• settlement arrangements after a dispute.

This is one of the biggest reasons to have a lawyer review the deed: you want to understand whether you’re guaranteeing a fixed deal, or a moving target.

5. Demand And Payment Mechanics

Look at how the other party can “call on” the guarantee. For example:

• Do they have to first demand payment from the company?
• Can they demand payment from you immediately?
• How quickly do you have to pay after a demand (e.g. 2 days, 5 days, “immediately”)?

If the deed allows immediate demand and short payment windows, you may need to treat it like a serious personal financial commitment - because it is one.

6. Legal Costs On An Indemnity Basis

Many deeds require you to pay the other party’s legal costs on an “indemnity basis” if they enforce the guarantee. In simple terms, that can mean broader cost recovery than standard “party and party” costs.

Even if the underlying debt isn’t huge, enforcement costs can add up quickly.

7. Joint And Several Liability

If there are multiple guarantors (for example, two directors), the deed may say liability is “joint and several”. This usually means the other party can pursue either guarantor for the full amount, not just “their share”.

That can create messy outcomes if one guarantor has more personal assets than the other.

Can You Limit Your Risk Before You Sign?

Yes - in many cases, you can negotiate parts of a Deed of Guarantee & Indemnity. You won’t always get everything you ask for, but it’s often possible to reduce the risk to something that matches the commercial reality of the deal.

Here are common ways to limit exposure.

Limit The Amount

Where possible, negotiate a cap (for example, “liability limited to $X”). This can be particularly relevant for supplier credit accounts or short-term arrangements.

Limit The Time

You might be able to negotiate that the guarantee:

• expires after a set date; or
• falls away once certain milestones are met (for example, after 12 months of on-time payments).

Limit The Scope

Ask whether the guarantee can be limited to:

• specific obligations (e.g. rent only, excluding make good costs);
• a specific agreement version (excluding future variations without written consent); or
• one location or one project (not all “future dealings”).

Exclude Certain Types Of Loss

Indemnities are often drafted very broadly. In some situations, you can negotiate exclusions or clarifications so you’re not exposed to unexpected categories of loss.

Require Notice And A Chance To Fix The Problem

Some deeds allow immediate enforcement without notice. It can be reasonable to request:

• formal written notice of default; and
• a short cure period (for example, 5–10 business days) before the guarantee is enforced.

Make Sure Your Internal Business Arrangements Match The Risk

If you’re a co-founder or you have multiple shareholders, it’s worth aligning decision-making and risk allocation behind the scenes.

For example, if one director signs a personal guarantee but another director controls finances, that’s a recipe for stress later. The risk is often better managed with clear internal governance documents like a Shareholders Agreement.

And if you’re not sure how the signing process should work (especially where deeds require witnessing), it’s worth being careful - a signed deed can be hard to unwind later.

Key Takeaways

• A Deed of Guarantee & Indemnity is a document where you promise to cover another party’s obligations and losses if they default, commonly used for leases, lending, and trade credit.
• A guarantee and an indemnity aren’t the same thing - indemnities are often broader and can make you liable for a wider range of losses, including legal and enforcement costs.
• Key clauses to watch include “all monies” wording, duration, variations without consent, demand mechanics, legal costs, and joint and several liability.
• You can sometimes negotiate limits on amount, time, scope, and enforcement process - and it’s worth trying, especially if you’re signing personally.
• Because a deed can expose you to significant personal risk, getting the document reviewed before you sign can protect you from day-one problems that are hard (and expensive) to fix later.

If you’d like help reviewing or negotiating a Deed of Guarantee & Indemnity, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.