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 ?
Under guaranteed funding, the Secretary of Veterans Affairs would retain the authority to manage enrollment in the VA health care system, such as he did earlier this year when he temporarily halted enrollment of non-service connected veterans able to pay for their own health care.
What is interesting is that participants don't expect to be made whole if the fund has stocks or bonds; but if there are guaranteed contracts, they think the company should stand behind it.
Contributions are calculated using a simple present-value formula based on the guaranteed rate of return, the retirement benefit and the number of years until retirement.
The income base - the basis for the guaranteed retirement paycheck once withdrawals begin - then becomes the highest of three possible values: the 5% guaranteed growth value based on net contributions; the highest birthday value; or the market value of the participant's account.
The rules apply to guaranteed payments made within two years of the date of the property's contribution.
If the market performs well and the customer's account value increases, the Total Guaranteed Withdrawal Amount is automatically "stepped-up" to equal the account value on each contract anniversary.
In Letter Ruling 9409018, the IRS reversed its 1990 ruling and stated that the marital deduction should not be reduced by the entire unpaid balance of the guaranteed loans, unless at the time of the taxpayer's death it appeared that a default was imminent, performance under the guarantee was likely and any subrogation rights were worthless.
The rule does not apply, however, if interest paid under the guaranteed debt is subject to the 30% "gross basis" tax.
This new feature, aimed at helping individuals and their spouses achieve a more secure retirement, will be available through a rider to Pioneer's AnnuiStar Variable Annuities and will offer a guaranteed minimum withdrawal benefit for life.
A plethora of sophisticated guaranteed benefit riders has hit the variable annuity market in recent years, developed to satisfy the boomers' complex array of emerging needs:
A variable annuity is a financial retirement product that combines tax-deferred savings with insurance benefits, including guaranteed lifetime income payments.