Business Glossary

three-party agreement, involving a promise by one party (the guarantor) to fulfill the obligation of a person owing a debt if that person fails to perform. The guaranty (also spelled guarantee) is a contingent liability of the guarantor.

1. promise to be responsible for the debt , default , or miscarriage of another.
2. warranty or promise to undertake an original obligation.
3. something given as security for the performance of an act or the continued quality of a thing. See also surety bond .

an assurance provided by one party that another party will perform under a contract.

Example: Fred Garrison is an experienced developer. His daughter, Ruth, decides to branch out and start her own company. The construction lender requires a guaranty from Fred Garrison before granting Ruth Garrison a loan for her first project.