guaranty of debt repayment or fulfillment of contractual obligation. Borrowers unable to obtain credit under their own name often have a third party sign the application. Under a surety agreement, the lender can look first to the surety or guarantor for payment if the borrower defaults. A surety who pays a borrower's debt takes an assign- ment of the creditor's rights through subrogation and can attempt to recover that payment from the borrower.
individual or corporation, usually an insurance company, that guarantees the performance or faith of another. Term is also used to mean surety bond, which is a bond that backs the performance of the person bonded, such as a contractor, or that pays an employer if a bonded employee commits theft.
one who guarantees the performance of another.
Example: Ridley employs a contractor to construct a house. Under the contract, the contractor is required to obtain a performance bond against failure to perform the work. Ace bonding Co. provides the bond, thereby acting as a surety. Should the contractor fail to perform, Ace compensates Ridley for damages.
