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 US DOE's loan program office (LPO) administers a four-phase process under the Title XVII clean energy projects loan guarantee program, which finances innovative renewable energy and efficient energy projects.
It is plausible, therefore, that a more conditional loan guarantee program, available only to households hit by such shocks, might allow policymakers to provide the benefits from guarantees while limiting their cost.
If Insignia Athletics is unable to pay the outstanding balance on the line of credit, the city will cover the amount of unpaid credit in full, up to $877,500, at which time the loan guarantee will become a Section 108 loan.
The deal is due to be closed by Friday, by which time the DOE must close all pending renewable-energy loan guarantees.
7 million loan guarantee to construct and operate a 17 megawatt wood-fueled biomass facility.
The reduction of the guarantee fee can be applied for a maximum period of two years for loan guarantees contracted no later than 31 December 2010.
Most of the arguments for and against the proposed Chrysler loan guarantee program are relevant to current proposals for credit assistance to the Big Three.
Department of Energy as part of the DOE's pre-application process for loan guarantees under the Energy Policy Act of 2005.
The European Commission said on Tuesday (24 October) that it has launched an in-depth investigation into a EUR570m loan guarantee granted by the French government to the Finnish electricity utility Teollisuuden Voima Oy (TVO).
The act created the Local Television Loan Guarantee Program and established the LOCAL Television Loan Guarantee Board to finance projects to provide access to signals of local television stations to households in areas with limited or no access to such signals from a commercial, for-profit satellite service or other multichannel video provider.
Unless they make an actual "economic outlay" under the arrangement, taxpayers generally may not increase their basis in S corporation stock as a result of a loan guarantee, pledge of stock as collateral or loss of control of the corporation.