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 ?
Agreement on Loan Guarantee in the amount of 25% of the transaction amount with the Agency was signed by Irkiya Tukhvatullina, the director of Marat-El Company.
Smith, executive director, Southern Alliance for Clean Energy, said: "Given some of the lessons learned and political games developing from the Solyndra loan guarantee case, it's unacceptable and inconsistent that the much larger Vogtle loan isn't getting more intense scrutiny when the potential risk to taxpayers is much greater.
A group of lenders led by Citigroup Inc and Goldman Sachs Group Inc (NYSE: GS) will soon close a Department of Energy loan guarantee for USD1.
According to the DOE, loan guarantees will enable the Department to share some of the financial risks of projects that employ emerging or significantly improved energy technologies that avoid, reduce, or sequester air pollutants and greenhouse gases.
Since 1985, Communist China has become the largest Asian beneficiary of Eximbank loans and loan guarantees.
As a former loan officer with the New Jersey Economic Development Authority, I am familiar with the criteria used for providing loans and loan guarantees to the business community.
According to Barragan, the cuts would effectively quash an entire year of loan guarantees, severely limiting the center's effectiveness.
Of the fourscore or so outstanding deals, about 85% were loan guarantees of less than $10 million and 60% of less than $1 million.
18, Amendments to Accounting Standards for Direct Loans and Loan Guarantees, is to improve financial reporting for subsidy costs and performance of federal credit programs.
The move follows the creation of a 20 trillion yen public loan guarantee system last October to alleviate the credit crunch that has made it difficult for many small and midsize companies to raise funds through bank loans, they said.
The SBA was ordered to lower its loan guarantee on export loans to small businesses from 90% to 75%.
The Clinton administration used the Exchange Stabilization Fund to provide $20 billion in loan guarantees and solicited other funding from the G-7 countries.