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 ?
By systematically identifying and guaranteeing important service quality attributes the firms can work up to a more comprehensive guarantee including an unconditional guarantee.
* Whether the shareholders demanded payment for guaranteeing the debt.
Going a step further, why should a parent be considered as having made a taxable gift when guaranteeing a loan but not when making a direct loan at adequate interest?
Additionally, a guarantor is allowed a business bad debt deduction for any payment made in the capacity as guarantor, as long as the reason for guaranteeing the debt was closely related to the trade or business.
Deposits and Guarantees required: b) bank guarantees or guarantees of cooperative savings and credit, the fact that guaranteeing the cash is always a monetary guarantee,
* The taxpayer's ability to find comparable employment elsewhere.(17) The Litwin(18) case illustrates how these various factors have been used in determining a taxpayer's dominant motivation behind making and guaranteeing loans.