Model Commercial Bond

Section 1: General Information

BETWEEN THE UNDERSIGNED :

[Name of Creditor], a body corporate duly incorporated under the laws of Canada, having its registered office at [full address], duly represented for the purposes hereof by [name of representative], in his capacity as [title of representative], hereinafter referred to as ” the Creditor ” ;

AND

[Name of principal debtor], a legal person duly incorporated under the laws of Canada, having its registered office at [full address], duly represented for the purposes hereof by [name of representative], in his capacity as [title of representative], hereinafter referred to as ” the Debtor “;

AND

[Name of Guarantor], a natural person of legal age, domiciled at [full address], acting in a personal capacity and with full knowledge of the facts, hereinafter referred to as ” the Guarantor “;

PREAMBLE

WHEREAS the Creditor has granted or intends to grant commercial credit or any other financial benefit to the Debtor in the context of an ongoing business relationship;

WHEREAS the Debtor is bound to the Creditor by various present or future contractual obligations;

ATTENDU QUE la Caution souhaite garantir le bon accomplissement des obligations contractées par le Débiteur envers le Créancier, notamment quant au paiement des sommes dues et à venir ;

THEREFORE, the parties agree as follows:

Section 2: Guarantor’s undertaking

Purpose of the Guarantee

The Guarantor hereby irrevocably undertakes to the Creditor to jointly and severally guarantee with the Debtor the payment in full of all sums, debts, obligations or charges, present or future, due or to become due, including principal, interest, legal costs, penalties and accessories of any kind, which the Debtor may owe to the Creditor under the commercial contract entered into on [date of signature of the principal contract], relating to [brief description of the subject of the contract].

Amount guaranteed

This guarantee is given for a maximum amount of [amount in figures and letters], covering all the Debtor’s contractual obligations. This amount includes not only the principal debts, but also all interest, costs, contractual or legal penalties, as well as collection costs incurred by the Creditor in enforcing its rights.

Term of commitment

The present guarantee is granted for a period of [duration specified in months or years], taking effect from the date of signature of the present document. In the absence of any stipulation to the contrary, the guarantee shall remain in force for as long as the Debtor owes an obligation to the Creditor, even in the event of an extension of the payment deadlines or tacit renewal of the principal contract.

Nature of the undertaking

This guarantee is joint and several, in accordance with article 2335 of the Civil Code of Québec, which implies that the Creditor may directly and immediately demand performance of the guaranteed obligations from the Guarantor, without first having to put the Debtor in default or exhaust recourse against him. The Guarantor expressly waives the benefit of division and discussion, as provided for in articles 2337 and 2338 C.C.Q., and undertakes to respect all obligations arising from the main contract, even in the event of its modification or renewal.

Informed consent

The Guarantor declares that it has been fully informed of the nature and extent of its commitments, of the risks incurred, and of the Debtor’s current financial situation. The Guarantor acknowledges that it has acted with full knowledge of the facts and has not been misled or coerced into entering into this guarantee.

Section 3: Final provisions

Expressly formulated waivers

The Guarantor expressly waives the benefits provided by articles 2337 and 2338 of the Civil Code of Quebec, i.e. the benefit of division and the benefit of discussion. These waivers allow the Creditor to act directly against the Surety without having to first sue the Principal Debtor.

Although restrictive, these clauses are commonly used in commercial contracts to provide the Creditor with solid, immediate security. It is therefore essential that the Guarantor understands the legal consequences of these commitments, in particular the possibility of being sued alone, without prior recourse against the Debtor.

Notification and communication

All communications and notifications relating to this agreement must be made in writing and sent to the addresses shown in the heading. In the absence of a change notified by one of the parties, all correspondence will be deemed validly sent to the address initially mentioned.

Applicable law and jurisdiction

This agreement shall be governed by the laws in force in the Province of Quebec, more particularly by the provisions of the Civil Code of Quebec relating to contracts of suretyship (articles 2333 to 2362 C.c.Q.).

The courts of the judicial district of [city to be specified] shall have exclusive jurisdiction over any dispute arising from the interpretation or execution of this undertaking.

Conclusion

The commercial surety model presented above makes it possible to secure business relations between a Creditor and a Debtor by adding an additional personal guarantee: that of the Surety. It is essential that each party take the time to understand the legal implications, both financial and contractual.

As a reminder, a surety undertaking :

• Must be clearly worded, leaving no room for ambiguity.
• It must specify the amount guaranteed, the duration of the commitment and whether the guarantee is joint or several.
• Implies important legal consequences for the Guarantor, particularly in the event of default by the Debtor.

As article 2335 of the Civil Code of Quebec points out: “The creditor may sue the surety directly, if he has committed himself jointly and severally, without being obliged to sue the principal debtor first.”

Practical tip: before signing a guarantor’s undertaking, it is strongly recommended that you consult a lawyer to analyze the scope of your obligations, especially in a commercial context where the amounts at stake can be significant.

For further information, please consult

• Civil Code of Quebec – Articles 2333 to 2362 on suretyship
• CanLII – Online case law database for judicial decisions on commercial surety bonds
• SOQUIJ – Quebec case law and applicable doctrine

avocat-montreal.ca offers you this complete model, drafted by lawyers, to avoid any errors in wording or interpretation, and to ensure that your document complies with Quebec legal requirements.