GUARANTY
guaranty (gar-<<schwa>>n-tee), n.1. A promise to answer for the payment of some debt, or
the performance of some duty, in case of the failure of another who is liable in the first instance. •
The term is most common in finance and banking contexts. While a warranty relates to things (not
persons), is not collateral, and need not be in writing, a guaranty is an undertaking that a person
will pay or do some act, is collateral to the duty of the primary obligor, and must be in writing. On
the spelling of guaranty vs. guarantee, see the quotation at GUARANTEE(2). — Also termed
guaranty contract. [Cases: Guaranty 1.]
“Both guaranty and warranty are undertakings by one party to another to indemnify the party
assured against some possible default or defect. But a guaranty relates to the future, as a collateral
promise designed to protect the promisee from loss in case another fails to perform his duty. A
warranty relates to the present or past, and is an independent promise designed to protect the
promisee from loss in the event that the facts warranted are not as the promisor states them to be
when the contract is made. A warranty is broken as soon as it is made if the facts are not as
represented, and is enforceable though oral; whereas a guaranty is not breached until a future
default occurs, and is unenforceable unless in writing.” Laurence P. Simpson, Handbook on the
Law of Suretyship 23 (1950).
“A transaction of guaranty involves at least three parties: a promisor, a creditor (the person to
whom the promise is made), and a debtor — although at the time the promise is made, the person
denominated the ‘creditor’ need not have extended the credit to the person denominated as the
‘debtor.’ The usual guaranty situation arises when the promisor makes a promise to the creditor
either as to the solvency of the debtor or as to the payment of the debt.” 38 Am. Jur. 2d Guaranty §
1, at 996 (1968).
absolute guaranty. 1. An unqualified promise that the principal will pay or perform. 2. A
guarantor’s contractual promise to perform some act for the creditor — such as paying money or
delivering property — if the principal debtor defaults.
conditional guaranty.A guaranty that requires the performance of some condition by the
creditor before the guarantor will become liable. [Cases: Guaranty 42.]
contingent guaranty.A guaranty in which the guarantor will not be liable unless a specified
event occurs.
continuing guaranty.A guaranty that governs a course of dealing for an indefinite time or by a
succession of credits. — Also termed open guaranty. [Cases: Guaranty 38.]
general guaranty. 1. A guaranty addressed to no specific person, so that anyone who acts on it
can enforce it. 2. A guaranty for the principal’s default on obligations that the principal undertakes
with anyone.
guaranty of collection.A guaranty that is conditioned on the creditor’s having first exhausted
legal remedies against the principal debtor before suing the guarantor. See guarantor of
collectibility under GUARANTOR.
guaranty of payment.A guaranty that is not conditioned on the creditor’s exhausting legal
remedies against the principal debtor before suing the guarantor. See guarantor of payment under [Blacks Law 8th]