Guarantee

Guarantee is a legal term more comprehensive and of higher import than either warranty or "security". It most commonly designates a private transaction by means of which one person, to obtain some trust, confidence or credit for another, engages to be answerable for him. It may also designate a treaty through which claims, rights or possessions are secured.

The giver of a guarantee is called the surety or the "guarantor". The person to whom the guarantee is given is the creditor or the "obligee"; while the person whose payment or performance is secured thereby is termed "the obligor", "the principal debtor", or simply "the principal".

Suretys have been classified as follows:

Guarantee is sometimes spelt "guarantie" or "guaranty". It is from an Old French form of "warrant", from the Germanic word which appears in German as wahren: to defend or make safe and binding.

In English law, a guarantee is a contract to answer for the payment of some debt, or the performance of some duty by a third person who is primarily liable for that payment or performance. It is a collateral contract, which does not extinguish the original obligation for payment or performance. It is rendered null and void if the original obligation fails. The liabilities of a guarantor in law depend upon those of the principal debtor, and when the principal's obligations cease the guarantor's do too, except in certain cases where the discharge of the principal debtor is by the operation of the law. If, for example, a person wrongly supposes that someone is liable to them, and a guarantee is given on that erroneous basis, the guarantee is invalid by virtue of the law of contracts, because its foundation (that another was liable) failed.

No special phraseology is necessary to form a guarantee. What distinguishes a guarantee from insurance is not any difference between the words "insurance" and "guarantee", but the substance of the contract entered into by the parties.

The statutory requisites of a guarantee are, in England, prescribed by (1) the statute of frauds, which provides that "no action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriages of another person, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized", and (2) Lord Tenterden's Act which enacts that "no action shall be brought whereby to charge any person upon or by reason of any representation or assurance made or given concerning or relating to the character, conduct, credit, ability, trade or dealings of any other person, to the intent or purpose that such other person may obtain credit, money or goods upon unless such representation or assurance be made in writing signed by the party to be charged therewith".

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