Guarantees are the most frequently taken and least frequently read security in the UAE. The Civil Transactions Law governs them as suretyship, and on 1 June 2026 the chapter moved to Articles 986 to 1035 of Federal Decree-Law No. 25 of 2025.
Three provisions decide most guarantee disputes and all three cut against the creditor: Article 1005, which discharges the guarantor to the extent the creditor loses the security; Article 1003, which gives the guarantor every defence the debtor has; and Article 1032, under which settling with one can discharge the other. Against that, Article 1029 runs the creditor's way: a guarantee does not die with the guarantor.
Contents
1. How little it takes to create a guarantee
Article 986 defines suretyship as a contract by which a person joins his obligation to the debtor's obligation, undertaking to the creditor to perform if the debtor does not.
The formation rules are strikingly permissive:
- Article 987(2) — "The guarantor's offer suffices for conclusion and effectiveness of the guarantee, unless the guaranteed party rejects it." No acceptance is required. An offer to guarantee, not rejected, is a guarantee.
- Article 988 — suretyship for a debtor is permissible without his knowledge, and permissible despite his objection. The debtor is not a necessary party.
Those two rules together mean a guarantee can arise from correspondence that was never intended as a security document. Anyone writing comfort language to a counterparty's bank should understand that the gap between comfort and suretyship is narrower here than in jurisdictions requiring signed, acknowledged instruments.
The capacity point that voids corporate guarantees
Article 989 provides that a suretyship is validly concluded only if the surety has capacity to make gratuitous dispositions. A guarantee is treated as a gratuitous act, not a commercial one, because the guarantor assumes liability without consideration.
For a company that raises the authority question squarely: does the constitution, and does the board or shareholder authority relied on, extend to gratuitous dispositions? Upstream and cross-stream guarantees — a subsidiary guaranteeing a parent, or a sister company — are where this bites, because the corporate benefit is indirect. A lender taking a group guarantee should diligence the authority against Article 989 rather than against general contracting power.
2. Article 1005 — lose the security, lose the guarantee
This is the provision lenders most often fall foul of, usually through routine administration rather than any considered decision.
Article 1005(1). "The guarantor's obligation is discharged to the extent the creditor causes loss of security interests."
1005(2). Security interests mean any security allocated to secure the debt, even if established after the suretyship, and any security established by operation of law.
Read the breadth of 1005(2). It is not limited to the security that existed when the guarantee was given, and it is not limited to security the parties created. A statutory lien or priority that the creditor allows to lapse is within it.
The discharge is pro tanto — to the extent of the loss — not total. But the quantification argument then becomes the whole dispute, and it is the creditor who has to justify the value it gave up.
What causes a loss of security in practice
- Releasing a mortgage or pledge on refinancing without re-taking it;
- Failing to re-register a mortgage when a facility is increased — recall that Article 1320 caps the security at the registered amount;
- Allowing a registration, renewal or filing to lapse;
- Consenting to a disposal of charged assets without substitution;
- Releasing a co-guarantor, which reduces the pool the paying guarantor can recover from.
The practical discipline for a lender is that every security release decision is also a guarantee decision, and the guarantor should be asked to confirm its position in writing at the same time. For a guarantor facing a call, the first disclosure request should be the complete security history of the facility.
3. The guarantor's defences and discharges
Article 1003 — every defence the debtor has
"The guarantor is discharged by the mere discharge of the debtor, and he may rely on all defences that the debtor may assert." The guarantee is accessory: if the underlying obligation fails, so does the guarantee.
Article 1003(2) carves out one case — where the debtor's defence is his own deficient capacity and the guarantor knew of it. A guarantor who knowingly guarantees the obligation of a person lacking capacity cannot then rely on that incapacity.
Article 1004 — accord and satisfaction
If the creditor accepts something else in consideration for the debt, both the principal debtor and the guarantor are discharged — unless that thing is evicted.
Article 1032 — the settlement trap, in both directions
If the guarantor or the debtor settles with the creditor for a portion of the debt, both their liabilities are discharged from the remainder. If the release of only the guarantor is stipulated, the creditor may either take the settled amount from the guarantor and the remainder from the principal debtor, or leave the guarantor and claim the whole from the debtor.
A creditor who takes a part-payment from a guarantor without expressly stipulating that only the guarantor is released has discharged the balance against the debtor too. That is a very expensive drafting omission on a settlement that may have been negotiated in an afternoon. The stipulation has to be express.
Article 1030 — extinction
- payment of the debt;
- destruction or loss of the property in the possession of the guaranteed party by force majeure and before demand;
- termination of the contract from which the guaranteed obligation arose;
- the creditor's release of the guarantor, or of the debtor from the debt.
Article 1031 — guarantees of a sale price
A guarantor of the sale price is released if the sale is rescinded, the item is subject to eviction, or it is returned due to a defect. Relevant wherever a parent guarantees a subsidiary's purchase obligations.
4. Article 1029 — the guarantee survives death
"The Suretyship contract does not terminate upon the death of the guarantor or the debtor, and the obligation remains upon the estate of whomever dies."
This runs the creditor's way and is frequently misunderstood by guarantors and their families. A personal guarantee given by an individual is an estate liability. It does not lapse on death, and it is not discharged by the guarantor's heirs having no involvement in the business.
Two consequences:
- For private clients. Personal guarantees belong in the estate planning exercise alongside assets. A succession structure that ignores outstanding guarantees understates the estate's liabilities, and the point interacts directly with the ownership and succession provisions elsewhere in the Law.
- For lenders. The security is more durable than often assumed, but the practical recovery shifts to an estate administration, with its own process and timetable. Monitoring the guarantor's status is worth doing before it becomes an estate claim.
5. Recourse: between guarantor and debtor, and between guarantors
Co-guarantors — Article 1020
Where guarantors are jointly and severally liable among themselves and one pays on maturity, he has recourse against each of the others for that other's share and for that other's share of any insolvent or bankrupt guarantor's share.
So insolvency of one co-guarantor does not fall on the paying guarantor alone — it is spread across the solvent ones. For anyone joining a guarantee alongside others, the credit assessment is therefore not only of the debtor but of the co-guarantors, because their failure increases your exposure.
Payment by the debtor — Article 1021
If the principal debtor pays before the guarantor pays, or learns of any cause preventing the creditor from claiming, he must inform the guarantor. If he fails to do so and the guarantor then pays, the guarantor may elect to recover either from the principal debtor or from the creditor.
That election is a useful remedy and it is rarely pleaded. A guarantor who pays after the debt has in fact been settled is not confined to chasing a debtor who has already demonstrated that it pays late; it can go against the creditor that accepted a second payment.
Timing — Articles 1002 and 1012
Article 1002: the guarantor performs on maturity of the term, or on realisation of the condition where the obligation is contingent. Article 1012: where suretyship is given absolutely, the guarantor's obligation follows the principal debtor's, whether immediate or deferred — so an unqualified guarantee tracks any deferment of the underlying debt.
6. Checklists
Lender or creditor
- Diligence the guarantor's authority against Article 989 — capacity to make gratuitous dispositions, not general contracting power. Upstream and cross-stream guarantees are the exposure.
- Treat every security release, lapse or non-renewal as a guarantee decision. Article 1005 discharges the guarantor to the extent of the loss, including security created after the guarantee and security arising by operation of law.
- Re-register on any facility increase; Article 1320 caps the mortgage at the registered amount and the shortfall is a loss of security.
- On any part-settlement, expressly stipulate that only the guarantor is released, or Article 1032 discharges the balance against the debtor as well.
- Monitor guarantor status. The guarantee survives death under Article 1029, but recovery becomes an estate claim.
Guarantor
- On a call, request the full security history first. Article 1005 is the strongest defence and it is proved from the creditor's own file.
- Run every defence the principal debtor has — Article 1003 gives them all to you, subject only to the capacity carve-out in 1003(2).
- Check whether the debtor paid, or whether any cause prevented the creditor claiming. Article 1021 may give you an election to recover from the creditor.
- Assess your co-guarantors, not just the debtor. Article 1020 spreads an insolvent co-guarantor's share across the solvent ones.
- If you guaranteed a sale price, check Article 1031 — rescission, eviction or return for defect releases you.
Private client
- Personal guarantees are estate liabilities under Article 1029. Schedule them in any succession plan.
- Be careful with comfort correspondence: Article 987(2) makes the guarantor's offer sufficient on its own, and Article 988 does not require the debtor's knowledge or consent.
Primary sources
Every provision quoted above is taken from the instruments below. Links go to the official consolidated text, not to secondary commentary.
- Federal Decree-Law No. 25 of 2025 issuing the Civil Transactions Law — suretyship at Arts 986–1035; 989 capacity, 1003 defences, 1005 loss of security, 1020 co-guarantors, 1029 death, 1032 settlement
- UAE Ministry of Justice — laws and legislation — consolidated Arabic text, which governs over any English rendering
- UAE Government Portal — justice, safety and the law — federal legislation and the Official Gazette
Questions we are asked
Is a guarantee valid in the UAE if the debtor did not agree to it?
Yes. Article 988 of Federal Decree-Law No. 25 of 2025 provides that suretyship for a debtor is permissible without his knowledge and permissible despite his objection. The debtor is not a necessary party. Article 987(2) goes further on formation: the guarantor's offer suffices for conclusion and effectiveness of the guarantee unless the guaranteed party rejects it, so no acceptance is required either. Comfort correspondence can therefore come closer to a binding suretyship than parties intend.
Can a guarantor escape liability if the lender released other security?
To the extent of the loss, yes. Article 1005(1) discharges the guarantor's obligation to the extent the creditor causes loss of security interests, and Article 1005(2) defines those broadly — any security allocated to secure the debt, even if established after the suretyship, and any security established by operation of law. Releasing a mortgage on refinancing without re-taking it, letting a registration lapse, or failing to re-register on a facility increase can all engage it. The discharge is proportionate, so quantifying the value given up becomes the dispute.
Does a personal guarantee end when the guarantor dies?
No. Article 1029 provides that the suretyship contract does not terminate on the death of either the guarantor or the debtor, and the obligation remains on the estate of whoever dies. A personal guarantee is therefore an estate liability and should be scheduled in any succession plan. For the creditor the security is durable, but recovery shifts into estate administration.
What defences can a guarantor raise?
All of the debtor's. Article 1003(1) provides that the guarantor is discharged by the mere discharge of the debtor and may rely on all defences the debtor may assert. The single exception in Article 1003(2) is where the defence is the debtor's own deficient capacity and the guarantor knew of it. Separately, Article 1004 discharges both where the creditor accepts something else in satisfaction, unless that thing is evicted.
What happens if a creditor settles with the guarantor for part of the debt?
Unless it stipulates otherwise, it loses the balance against the debtor too. Article 1032 provides that where either the guarantor or the debtor settles for a portion of the debt, both liabilities are discharged from the remainder. If the release of only the guarantor is stipulated, the creditor may take the settled sum from the guarantor and the remainder from the debtor, or leave the guarantor and claim the whole from the debtor. The stipulation has to be express.
Does a company need special authority to give a guarantee?
Article 989 provides that a suretyship is validly concluded only if the surety has capacity to make gratuitous dispositions, because a guarantee is an assumption of liability without consideration. For a company that makes the question whether its constitution and the board or shareholder authority relied on extend to gratuitous acts — which is most acute for upstream and cross-stream guarantees, where the corporate benefit is indirect. Lenders should diligence authority against Article 989 rather than general contracting power.
If one of several guarantors becomes insolvent, who bears the loss?
The solvent co-guarantors share it. Article 1020 provides that where guarantors are jointly and severally liable among themselves and one pays on maturity, he may have recourse against each of the others for that other's share and for that other's share of the insolvent or bankrupt guarantor's share. Anyone joining a guarantee alongside others should therefore assess the co-guarantors' credit, not only the debtor's.
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Published 2026-10-03. General information only — not legal advice. Contact us for matter-specific advice.