Guaranty
Introduction to Guaranty
Guaranty, in law, obligation undertaken by one party to answer for the default of another. It is an agreement by one person to answer to another for the debt, or the performance of some contract or duty in case of default, of a third person who is originally liable for such payment or performance. The party who promises that the obligation of the principal or debtor will be paid or performed is called the guarantor.
A guaranty is similar in principle to a suretyship, in which a party known as the surety agrees to answer for the debt or default of another; it differs in that the promise of the guarantor is distinct from and collateral to that of the principal debtor, whereas a surety, although an accessory, is bound with the principal debtor as a copromisor. The contract of the surety is made at the same time and usually jointly with that of the principal, whereas that of a guarantor is a contract distinct from that of the principal. A surety is the insurer of the debt or obligation, whereas a guarantor is an insurer of the ability or solvency of the principal. Consequently, the surety may be joined with the principal as a defendant when the principal is sued for nonpayment of a debt, whereas the guarantor may be sued only after a judgment has been rendered on a suit for nonpayment brought by the creditor against the debtor. In many cases, however, the term surety is defined as including the term guarantor, so that a guaranty may be only one of several types of surety contract. In English common law a guaranty was equally enforceable whether given verbally or in writing. Under existing statutes in the U.S., a guaranty must be in writing.” (1)
Guaranty in International Trade
Meaning of Guaranty, according to the Dictionary of International Trade (Global Negotiator): A contract by which one person (the guarantor) agrees to pay another’s debt or to perform another’s obligation only if that other individual or legal entity fail to pay or perform. A guaranty is usually a separate contract from the principal agreement, and therefore the guarantor is secondarily liable to the third person. See guarantor.Guaranty
Absolute guaranty
An unconditional undertaking by a guarantor that debtor will pay debt or perform the obligation. For additional information related to the definition of Absolute guaranty in connection to Guaranty, please visit the legal dictionary here. Guaranty
Conditional guaranty
One which depends upon some extraneous event, beyond the mere default of the principal. For additional information related to the definition of Conditional guaranty in connection to Guaranty, please visit the legal dictionary here. Guaranty
Collateral guaranty
A contract by which the guarantor undertakes, in case the principal fails to do what he has promised or undertaken to do, to pay damages for such failure. For additional information related to the definition of Collateral guaranty in connection to Guaranty, please visit the legal dictionary here. Guaranty
Continuing guaranty
A guaranty which is not limited to a particular transaction but which is intended to cover future transactions until revoked. For additional information related to the definition of Continuing guaranty in connection to Guaranty, please visit the legal dictionary here. Guaranty
Special guaranty
A guaranty which is available only to the particular person to whom it is offered or addressed. For additional information related to the definition of Special guaranty in connection to Guaranty, please visit the legal dictionary here. Guaranty
Guaranty company
A corporation authorized to transact the business of entering into contracts of guaranty and suretyship. For additional information related to the definition of Guaranty company in connection to Guaranty, please visit the legal dictionary here.
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See Also
- Guaranty, n
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See Also
- Warranty
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See Also
- Guaranty of payment
- Contract of Suretyship; Collateral guaranty
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Notes and References
- Information about Guaranty in the Encarta Online Encyclopedia