Guaranty Agreement

Answer 1

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A Guaranty Agreement is a contract which is supportive to a primary obligation by a "Debtor" (or "Obligor," the person or entity who has engaged to perform some obligation) to a "Creditor" (or "Obligee," the person or entity for whom the Debtor will perform the contracted obligation). In the primary contract, the Debtor promises to provide the Creditor with something of value -- either with money (e.g., repayment of a loan) or with goods or services (e.g., supplying the Creditor with 200 component parts per month).

In the Guaranty Agreement, the "Guarantor" agrees to fulfill the promises of the Debtor if the Debtor does not perform the primary obligation. For example, a Guaranty Agreement may be entered into to assure the repayment of a certain sum of money, the repayment of additional credit on an already past-due loan, the payments due under a lease, the payment of future balances which may arise from credit card purchases, or the performance of a contractual task.

A Guaranty can be "absolute" (that is, if the Debtor does not perform for any reason, the Guarantor will) or "conditional" (that is, the liability of the Guarantor is conditioned upon the occurrence of some event in addition to the Debtor's default). A Guaranty may be restricted to only guarantee certain specified transactions or amounts, or it may cover any obligations incurred during an indefinite period of time.