Limited Guarantees of Collectability

Given the current economic difficulties it can be expected that vendors will seek additional security before they extend credit to their customers. Traditionally vendors have sought guarantees from the owners of customers including parent companies when the customer was a subsidiary.  Most guarantees are guaranties of payment that allow the vendor to proceed directly against the guarantor if there is a default by the customer; however, guarantors may want to bargain for a guaranty of collection that provides that the guarantor will only be liable after the vendor has reduced its claim against the actual customer to judgment and judgment has been returned unsatisfied or the customer has become insolvent or it is otherwise apparent that it is useless to proceed against the customer.  The attached report includes more details as well as a form of Limited Guaranty of Collectability of Indebtedness.

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