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 ?
* FAMILY LOANS AND LOAN GUARANTEES can have unfavorable income and gift tax consequences and invite unwanted Internal Revenue Service scrutiny.
One of the newer loan guarantee programs available through Rural Development is the Renewable Energy and Energy Efficiency loan program.
Despite their likely benefits, loan guarantees will create costs, particularly in two places.
Callaway Electric Cooperative in Missouri, which serves 13,000 customers, received a $9.3 million loan guarantee. The funds will be used to build 40 miles of distribution line and make other system improvements.
The Tax Court held that the loan guarantees were Sec.
"The MoCI programme, which was launched on 31 October last year, will initially give out loan guarantees to 50 small and medium companies during the trial period," said a report in the Muscat Daily newspaper.
US pilots and airline firms have asked a federal judge to stop the Export-Import Bank of the United States from providing Indian aircraft operator, Air India, with USD1.3bn in loan guarantees.
Federal loan guarantees for the pipeline are $21 billion.
23 September 2010 - Slovenia has granted loan guarantees worth a total EUR89.3m (USD119m) to five banks out of EUR100m guarantees available at an auction, the Finance Ministry said today.
Recommendation: To improve DOE's ability to evaluate and implement the LGP, the Secretary of Energy should direct the program management to revise the process for issuing loan guarantees to clearly establish what circumstances warrant disparate treatment of applicants so that DOE's implementation of the program treats applicants consistently unless there are clear and compelling grounds for doing otherwise.
The Bank provides a variety of financing mechanisms, including working capital guarantees to help small and medium-sized US businesses, export-credit insurance to protect against nonpayment by foreign buyers, and loan guarantees and direct loans to assist foreign buyers of US goods and services.
The news came two hours before Business Secretary Vince Cable finally confirmed the Government would offer loan guarantees to GM.