Guarantee

Introduction A guarantee is a contract between a guarantor and the creditor to ensure the debtor's obligation to the creditor should the debtor fail to meet that obligation. Under guarantee, there is a contract between the creditor (such as a bank) and the guarantor. There is no contract between the debtor and the guarantor. The guarantor, also called the 'surety', may either guarantee the payment of money or the performance of some other contractual obligation. …

…that the surety would not have entered the guarantee without the creditor's performance. Each of the above events may be excluded from discharging the guarantee if the parties agree to exclude it. It is normal in most commercial guarantees that such events are excluded as giving rise to discharge. Finally, a guarantee is normally construed strictly in favour of a surety, so the language of the contract should be unambiguous to support such an exclusion.