Parent Company Guarantee Clause (Outsourcing)

Summary

This clause is a parent company guarantee that obliges the supplier to provide the customer with a guarantee to be given by the supplier's parent company guaranteeing the obligations of the supplier under an outsourcing agreement. A parent company guarantee may be desirable if the supplier has minimal assets, is not the primary operating company in the group or if the customer has other reasons for concern. This clause includes practical guidance and drafting notes. Prior to entering into the agreement, the customer should undertake due diligence on the financial strength of the supplier and its position in any corporate group to which it belongs. This clause obliges the supplier to provide the customer with an original copy of the guarantee on the effective date together with a resolution of the board of directors of the parent company. Failure to do so is treated as a material breach entitling the customer to terminate the agreement if the breach has not been remedied. For a general ...