Glossary
Indemnity vs guarantee
An indemnityAn indemnity is a promise to cover another party's losses arising from a particular event or claim.More in the glossary is a primary promise to hold the other side harmless against a named loss. A guarantee is a secondary promise to answer for someone else's debt if they default. Guarantees must be in writing and signed: Statute of Frauds 1677 s.4. Calling a clause an indemnity does not decide the point; the substance does.
Last updated 28 October 2026
The indemnity in a freelance paper is usually “we will cover you if our work infringes.” That is a primary obligation. It bites whether or not someone else has defaulted. A personal guarantee is the other animal: the director pays if the company does not. Actionstrength Ltd v International Glass Engineering [2003] UKHL 17 is why an oral guarantee is a waste of breath.
We draft indemnities that name the risk and sit against the liability cap unless you carve them out. Lex will not turn a director’s signature on the company block into a guarantee. If you want the human on the hook, add a separate signed guarantee or a deed.
Does a guarantee have to be in writing?
Yes. Statute of Frauds 1677 s.4: no action on a special promise to answer for another’s debt unless the agreement, or a note of it, is in writing and signed by the party to be charged. An indemnity, being a primary obligation, is outside that formality. Do not rely on a Slack “I’ll cover it if they don’t pay”.
How do I tell them apart?
Ask whether the promise depends on someone else’s default. If it does, it is a guarantee. If the promisor is covering a named loss as their own obligation, it is an indemnity. The label in the heading is not decisive. A “guarantee and indemnity” paragraph should be split so each promise is visible.
Should an indemnity be capped?
Say so. Many papers put IP and confidentialityConfidentiality is a promise to keep shared information private and to use it only for the agreed purpose.More in the glossary indemnities outside the liability cap and keep ordinary indemnities inside. An uncapped indemnity for “any loss arising from the services” is a second contract sitting beside the cap. See limitation of liability.
Who usually gives a personal guarantee?
A director of a thin company, when the other side will not take the company’s covenant alone. It should name the debts, last for a defined period, and be signed by the individual in their personal capacityCapacity is the legal power to bind yourself to a contract. Adults of sound mind and companies registered under the Companies Act 2006 have it. A company's own constitution cannot be used to undo a deal it has done: Companies Act 2006 s.39. Minors can still make some contracts; the Minors' Contracts Act 1987 sets the modern rules.More in the glossary. A company signature block does not do that. See personal guarantee.
A worked example
A new limited company books a £12,000 film. The studio wants comfort. They do not treat the director’s company signature as a guarantee. They add a one-page personal guarantee, signed by the director as “Guarantor”, promising to pay if the company does not, in writing, as s.4 requires. The services agreement’s IP indemnity stays a primary obligation of the company and sits outside the cap.
How it shows up in a contract
Sample wording · our own drafting
The indemnity in this clause is a primary obligation of the indemnifying party and is not a guarantee. A person who signs this agreement for a company does so as the company's agent and not as guarantor. Any guarantee must be in a separate document in writing signed by the guarantor.
In Plain English
The indemnity is this party’s own promise to cover a named loss. It is not a promise to pay someone else’s debt. Signing for a company does not make you a guarantor. A guarantee needs its own signed writing.
Common mistakes
- Treating a director’s company signature as a personal guarantee.
- Relying on an oral “I’ll cover it” — the Statute of Frauds 1677 s.4 will stop the claim.
- Leaving an indemnity silent on the liability cap.
- Heading a clause “Guarantee” when the substance is a primary indemnity, or the other way around.
What the legislation says
No action may be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person, unless the agreement or some memorandum or note of it is in writing and signed by the party to be charged or an authorised agent.
Source: Statute of Frauds 1677, s.4Checked 3 November 2026Pending lawyer review
Sources
- Statute of Frauds 1677, s.4Checked 3 November 2026Pending lawyer review
Frequently asked questions
What is the difference between an indemnity and a guarantee?
An indemnity is a primary promise to cover a named loss. A guarantee is a secondary promise to answer for someone else’s debt if they default.
Does a guarantee have to be in writing?
Yes. Statute of Frauds 1677 s.4. An oral guarantee is not enforceable. See /glossary/personal-guarantee.
Should an indemnity be capped like other liability?
Say so. Many papers put IP indemnities outside the cap and ordinary ones inside. Silence is how the cap becomes ornamental. See /glossary/liability-cap.
Who usually gives a personal guaranteeA personal guarantee is a promise by an individual — often a director — to answer for a company's debt if the company does not pay. It must be in writing and signed: Statute of Frauds 1677 s.4. A company signature block does not make the director a guarantor. Use a deed if there is no consideration.More in the glossary?
A director of a thin company. They must sign in their personal capacity. The company signature block is not a guarantee.
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The legal wording governsLast reviewed 28 October 2026Pending lawyer review