{"id":12060,"date":"2018-01-13T03:31:59","date_gmt":"2018-01-13T03:31:59","guid":{"rendered":"https:\/\/reunitethestates.org\/?page_id=12060"},"modified":"2018-03-10T17:09:59","modified_gmt":"2018-03-10T17:09:59","slug":"guaranty-a-written-promise-to-answer-for-the-debt-default-or-miscarriage-of-another-person-provided-such-person-does-not-respond-by-payment-or-performance","status":"publish","type":"page","link":"https:\/\/reunitethestates.org\/?page_id=12060","title":{"rendered":"guaranty – a written promise to answer for the debt, default, or miscarriage of another person, provided such person does not respond by payment or performance"},"content":{"rendered":"

\u00a0 \u00a0 \u00a0This page is continued from Legal Instruments<\/a> >>>> Undertaking<\/a>:<\/span><\/strong><\/p>\n

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guaranty<\/span>:<\/span><\/span><\/strong>
\n n<\/em>. (16c)<\/span><\/span><\/p>\n

1. <\/span><\/strong>GUARANTEE (1).<\/span><\/span><\/p>\n

2. A promise to answer for the payment of some debt, or the performance of some duty, in case of the failure of another who is liable in the <\/span><\/strong><\/span>first instance; a collateral undertaking by one person to be answerable for the payment of some debt or performance of some duty or contract for another person who stands first bound to pay or perform. <\/strong>\u2014 aka<\/span> contract <\/strong><\/em><\/span><\/span>of guaranty<\/strong><\/em><\/span>.\u00a0 *\u00a0 The term is most common in finance and banking contexts and is often contrasted with warranty.\u00a0 While a warranty relates to things (not persons), is not collateral, and need not be in writing, a guaranty is an undertaking that a person will pay or do some act, is collateral to the duty of the primary obligor, and must be in writing.\u00a0 The term is also contrasted with surety.\u00a0 A guaranty can exist only where there is some principal or substantive liability to which it is collateral.\u00a0 If there is no debt, default, or miscarriage of a third person either present or prospective, there can be no guaranty.<\/strong> On the spelling of guaranty vs. guarantee, see the quotation at GUARANTEE (2). \u2014 aka<\/span> guaranty contract<\/span><\/strong><\/em><\/span>. See <\/span><\/span>SURETYSHIP.<\/span><\/p>\n

1. An undertaking or promise, on the part of one person called the guarantor, which is collateral to a primary or principal obligation on the part of another, and which binds the guarantor to performance in the event of nonperformance by such other person, the latter being primarily bound to perform.<\/span> 24 Am J1st Guar \u00a7 3<\/span>. <\/span><\/span><\/strong><\/p>\n

Concisely, a promise to answer for the debt, default, or miscarriage of another person, provided such person does not respond by payment or perf<\/span>ormance.<\/span> Hickory Novelty Co. v. Andrews<\/em>, 188 NC 59, 123 SE 314<\/span>.<\/span>
\n<\/span><\/span><\/strong><\/p>\n

\n

The fundamental difference between a contract of guaranty and one of suretyship is that the guarantor\u2019s contract is collateral to and independent of the contract the performance of which he guarantees, while that of a surety is an original obligation. <\/span>24 Am J1st Guar \u00a7 11<\/span>.<\/span><\/strong>
\n<\/span>See absolute guaranty<\/em>; collateral guaranty<\/em>; conditional guaranty<\/em>; continuing guaranty<\/em>; general guaranty<\/em>; guaranty insurance<\/em>; letter of credit<\/em>; limited guaranty<\/em>; merger of guaranty<\/em>; offer to guarantee<\/em>; prior indorsements guaranteed<\/em>; special guaranty<\/em>; suretyship<\/em>; warranty<\/em>. [2]
\n<\/span><\/p>\n

1. A promise to pay the debt or satisfy the obligation of another person in the event that the person does not make payment or fails to perform.\u00a0 The person making the guaranty is called the guarantor, the person whose debt is guaranteed is the debtor, and the person to whom the guaranty is made is the creditor or guarantee.<\/span><\/strong><\/span>
\n \u00a0\u00a0\u00a0\u00a0 Compare surety<\/em>.<\/span>
\n \u00a0\u00a0\u00a0\u00a0 Also compare suretyship<\/em>; warranty<\/em>.<\/span>
\n \u00a0\u00a0\u00a0\u00a0 See absolute guaranty<\/em>; special guaranty<\/em>. [3]<\/span><\/p>\n<\/div>\n

\u00a0\u00a0\u00a0\u00a0 Excerpt from Laurence P. Simpson’s<\/span> Handbook on the Law of Suretyship<\/em><\/a> (1950):<\/span><\/span><\/strong><\/p>\n

\u00a0\u00a0\u00a0\u00a0 \u201c<\/span>Both guaranty and warranty are undertakings by one party to another to indemnify the party assured against some possible default or defect. But a guaranty relates to the future, as a collateral promise designed to protect the promisee from loss in case another fails to perform his duty. A warranty relates to the present or past, and is an independent promise designed to protect the promisee from loss in the event that the facts warranted are not as the promisor states them to be when the contract is made. A warranty is broken as soon as it is made if the facts are not as represented, and is enforceable though oral; whereas a guaranty is not breached until a future default occurs, and <\/span><\/span><\/strong>is unenforceable unless in writing.<\/span>\u201d<\/span><\/strong> [4]<\/span><\/span><\/p>\n

\u00a0\u00a0\u00a0\u00a0 Excerpt from 38 Am. Jur. 2d Guaranty \u00a7 1, at 996 (1968):<\/strong><\/span><\/p>\n

\u00a0\u00a0\u00a0\u00a0 \u201c<\/span>A transaction of guaranty involves at least three parties: a promisor, a creditor (the person to whom the promise is made), and a debtor -although at the time the promise is made, the person denominated the \u2018creditor\u2018 need not have extended the credit to the person denominated as the \u2018debtor.\u2019 The usual guaranty situation arises when the promisor makes a promise to the creditor either as to the solvency of the debtor or as to the payment of the debt.<\/span>\u201d<\/span><\/strong> [5]<\/span><\/span><\/p>\n

Related Terms:<\/span><\/strong><\/p>\n

guarantor<\/span><\/a> – someone who makes a guaranty or gives security for a debt, either guaranteeing payment or collection if the principal debtor defaults.<\/span><\/strong><\/p>\n

Various Types of Guaranties:<\/span><\/strong><\/p>\n

absolute guaranty<\/span>:<\/strong><\/span> (18c) 1. An unqualified promise that the principal will pay or perform.\u00a0 2. A guarantor\u2019s contractual promise to perform some act for the creditor \u2014 <\/strong><\/span>such as paying money or delivering property \u2014 if the principal debtor defaults.<\/span><\/strong><\/p>\n

conditional guaranty<\/span>:<\/strong><\/span> (1813) A guaranty that requires the performance of some condition by the creditor before the guarantor will become liable.<\/strong><\/span><\/p>\n

contingent guaranty<\/span>:<\/strong><\/span> (1843) A guaranty in which the <\/strong><\/span>guarantor will not be liable unless a specified event occurs.<\/strong>
\n<\/span><\/p>\n

continuing guaranty<\/span>:<\/strong> <\/span>(1817) A guaranty that governs a course of dealing for an indefinite time or by a succession of credits. <\/strong>\u2014 aka open guaranty<\/span><\/strong><\/em>.<\/span><\/p>\n

cross-stream guaranty<\/span>:<\/span><\/strong> (1986) A guaranty made by a company for the obligation<\/a> of another company when <\/strong><\/span>both are owned by the same parent company or individual.<\/span><\/strong><\/p>\n

downstream guaranty<\/span>:<\/strong><\/span> (1986) 1. A parent corporation\u2019s guaranty of a subsidiary\u2019s obligations<\/a>. 2. A guaranty made for a company by a guarantor who is also a partner, member, or stockholder of the company.<\/strong><\/span><\/p>\n

general guaranty<\/span>:<\/strong><\/span> (17c) 1. A guaranty addressed to no specific person, so that anyone who acts on it can enforce it.\u00a0 2. A guaranty for the principal\u2019s default on obligations that the principal undertakes with anyone.<\/strong><\/span><\/p>\n

good-guy guaranty<\/span>:<\/strong><\/span> (2004) A limited guaranty by a third-person that leased property or collateral will be kept in good condition and returned to the lessor or <\/strong><\/span>lender if a default occurs.\u00a0 *\u00a0 Good-guy guaranties are most commonly associated with real-property leases.<\/strong> \u2014 Also written good-guy guarantee<\/strong><\/em><\/span>. \u2014 aka <\/span>good-guy clause<\/strong><\/em><\/span>.<\/span><\/p>\n

guaranty of collection<\/span>:<\/strong><\/span> (1843) A guaranty that is conditioned on the creditor\u2019s having first exhausted legal remedies against the principal debtor before suing the guarantor.\u00a0<\/strong> See guarantor of collectibility<\/em> under GUARANTOR.<\/span><\/p>\n

guaranty of payment<\/span>:<\/strong><\/span> (1811) A guaranty that is not conditioned on the creditor\u2019s exhausting legal remedies against the principal debtor before suing the guarantor.<\/strong> See guarantor of payment<\/em> under GUARANTOR.<\/span><\/p>\n

irrevocable guaranty<\/span>:<\/strong><\/span> (1898) A <\/strong><\/span>guaranty that cannot be terminated unless the other parties consent.<\/span><\/strong><\/p>\n

limited guaranty<\/span>:<\/strong><\/span> (1831) An agreement to answer for a debt arising from a single transaction.<\/strong> \u2014 aka noncontinuing guaranty<\/span><\/strong><\/em>.<\/span><\/p>\n

revocable guaranty<\/span>:<\/strong><\/span> (1936) A guaranty that the guarantor may terminate without any other party\u2019s consent.<\/strong><\/span><\/p>\n

special guaranty<\/span>:<\/strong> <\/span>(18c) 1. A guaranty addressed to a particular person or group of persons, who are the only ones who can enforce it.\u00a0 2. A guaranty that names a definite person as obligee and that can be accepted only <\/strong><\/span>by the person named.<\/span><\/strong><\/p>\n

specific guaranty<\/span>:<\/strong> <\/span>(18c) A guaranty of a single debt or obligation.<\/strong><\/span><\/p>\n

upstream guaranty<\/span>:<\/strong><\/span> (1986) A guaranty made by a corporate subsidiary for the parent corporation\u2019s obligations<\/a>.\u00a0\u00a0<\/strong><\/span> guaranty bond. See BOND (2). guaranty company. See surety company under COMPANY. guaranty contract. See GUARANTY (1). guaranty fund. See FUND (1). guaranty insurance. See INSURANCE.<\/span><\/p>\n

guaranty letter of credit<\/span>:<\/strong> <\/span>See standby letter of credit<\/em> under LETTER OF CREDIT.<\/span><\/p>\n

guaranty stock<\/span>:<\/strong><\/span> See STOCK. <\/span><\/p>\n

guaranty treaty<\/span>:<\/strong><\/span> See guarantee treaty<\/em> under TREATY (1).<\/span><\/p>\n

References:<\/span><\/span><\/strong><\/p>\n

Disclaimer:<\/span><\/span><\/strong> All material throughout this website is compiled in accordance with Fair Use<\/a><\/span><\/strong>.<\/strong><\/p>\n

[1]: Black\u2019s Law Dictionary\u00a0Deluxe Tenth Edition\u00a0by Henry Campbell Black & Editor in Chief Bryan A. Garner<\/a>. ISBN: 978-0-314-62130-6<\/span><\/strong><\/p>\n

[2]: Ballantine\u2019s Law Dictionary\u00a0<\/a><\/span><\/strong>with Pronunciations
\n<\/span><\/em>Third Edition<\/span><\/strong><\/a>\u00a0by James A. Ballantine\u00a0<\/span><\/strong>(James Arthur 1871-1949).\u00a0\u00a0<\/span><\/em>Edited by William S. Anderson.\u00a0\u00a0\u00a9 1969 by THE LAWYER\u2019S CO-OPERATIVE PUBLISHING COMPANY.\u00a0 Library of Congress Catalog Card No. 68-30931<\/span><\/strong><\/p>\n

[3]: Ballantine’s Law Dictionary <\/a><\/span><\/strong>Legal Assistant Edition<\/span><\/a><\/em>
\nby Jack Ballantine\u00a0<\/span><\/strong>(James Arthur 1871-1949).\u00a0\u00a0<\/span><\/em>Doctored<\/span><\/a><\/strong>\u00a0<\/span><\/em>by\u00a0Jack G. Handler,\u00a0J.D.<\/a>\u00a0\u00a9 1994 Delmar by Thomson Learning.\u00a0 ISBN 0-8273-4874-6.<\/span><\/strong><\/p>\n

[4]: Laurence P. Simpson, Handbook on the Law of Suretyship<\/em><\/a> 23 (1950).<\/span><\/strong><\/p>\n

[5]: 38 Am. Jur. 2d Guaranty \u00a7 1, at 996 (1968)<\/span><\/strong><\/p>\n

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