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 ?
One important reason to view loan guarantees as potentially valuable in improving credit access is that under competitive conditions, loan guarantees decouple loan pricing from credit risk.
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.
7 million loan guarantee to construct and operate a 17 megawatt wood-fueled biomass facility.
The reduction of the guarantee fee can be applied during a period of up to two years for loan guarantees contracted no later than 31 December 2010.
Bodman unveiled program guidelines for a total of $2 billion in loan guarantees to help spur investment in projects that employ new energy technologies.
Since inception of the program, no loan guarantees have been approved and there are no current or anticipated budgetary resources available for future loan guarantees.
But Eximbank didn't really go into business until President Richard Nixon signed an October 18, 1972 "Presidential Determination" authorizing loans and loan guarantees to promote trade with the Soviet Union in the name of "detente.
5m from $3bn in loan guarantees this year because of Israeli settlement activities in the occupied West Bank and Gaza Strip.
The Act provides for up to $10 billion in federal loan guarantees to assist air carriers who suffered losses in the wake of the terrorist attacks of September 11, and to whom credit is not otherwise reasonably available from financial institutions.
Those familiar with the center, which provides loan guarantees to small firms that would otherwise not qualify for money lending, feel that its livelihood is threatened by Gov.
As of mid-1999, the total number of loans, loan guarantees and insurance guarantees--money set aside to cover the insurance costs of shipping goods--in deals between U.