guarantee

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Guarantee

The assumption of responsibility for payment of a debt or performance of some obligation if the liable party fails to perform to expectations.

Guarantee

A promise made by a third party to provide payment on a bond, loan, or other liability in the event of default. While many guarantees apply to debt instruments, they may also be used in day-to-day life. For example, a parent may sign a guarantee with a rental agency promising to pay rent on behalf of an adult child if he/she does not do it. Banks often make guarantees on behalf of certain clients, but, just as often, private parties make guarantees to banks to promise payment on private loans. Guarantees reduce the risk to loans and liabilities, and usually improve the credit agency ratings of bonds.

guarantee

or

warranty

a legally binding promise by the seller of a product to the purchaser that in the event of the product failing to work properly the seller will either replace or repair it free of charge, or refund the purchase price. Guarantees and warranties usually operate for a limited time-period from the date of purchase, though some products like cars may relate guarantee conditions to both time and mileage. Guarantees and warranties are an important means of promoting a product, in so far as they assure the buyer about the product's expected QUALITY and reliability. See CUSTOMER SERVICE, MARKETING MIX.

guarantee

see QUALITY.

guarantee

The act itself,or also the document,whereby one agrees to pay a debt if the principal obligor does not. Under common law, creditors had to exhaust their remedies against a debtor before pursuing a guarantor.Today, almost all guarantee instruments contain clauses allowing the creditor to seek payment directly from the guarantor if there has been a default by the debtor. Guarantee agreements must be in writing to be enforceable.Usually,there must be some consideration passing to the guarantor unless the instrument creating the obligation (note, lease) is signed at the same time as the guarantee,in which case the law assumes the guarantor has some interest in the transaction.

References in periodicals archive ?
The financial guarantee business entered into a critical period of transformation in the first half of 2015.
70 requires that beneficiaries of financial guarantees continue to recognize the full amount of their obligation until they are legally released from it, at which time they would recognized revenue.
The FNAIM Real-Estate Guarantee Fund Group is the number one financial guarantee company in France.
This Statement would enable financial statement users to better understand risk exposures of guarantors from financial guarantees that are issued, and credit enhancements received by state and local government debt issuers.
Guided by a vision to succeed and a mission to serve the community, it provides one-stop financial services including asset management, financial guarantees, small loans, financial leasing and equity investments.
Ambac has provided financial guarantee insurance on a number of Italian transactions including the euro 1.
Assured Guaranty completes the first monoline financial guarantee transaction in Europe since the beginning of the global credit crisis
163, Accounting for Financial Guarantee Insurance Contracts, by the Financial Accounting Standards Board (FASB) on Friday, May 23, 2008, which clarifies how FASB Statement No.
To find out what's happening in this complex market, please join us for a stimulating discussion about the growing role of financial guarantees in the marketplace.

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