A guaranty is an agreement where one person (Guarantor) accepts to perform the obligations of another person (Debtor) towards a third person (Creditor). In this way, it is as if the Guarantor had entered into the agreement directly with the Creditor. The Guarantor is liable only if the Debtor fails to fulfill the obligation to the Creditor the amount owed.
Guarantor: individual or corporation agreeing to perform the Debtor`s obligations if he fails to do so
Debtor: person who has obligations to perform in favor of the Creditor
Creditor: person to whom Debtor owes
Witness: attests that the Guarantor duly signed this Agreement
When to use this Guaranty template?
- While guarantees can be used for a variety of commercial transactions, they are typically used in connection with a loan of a sum of money or other property.
- Also, when creditors want for there to be a guarantor, it is typically because they believe the debtor not be solvent or because the debtor has no assets to his name.
The Guarantor’s liability under this Agreement is sometimes called “joint and several” or “solidary” liability. A person is “jointly and severally” or “solidarily” liable when such person is responsible for all of the obligations. If the Debtor is in default, i.e. he fails to fulfill his obligation (e.g. repay a sum of money when due), then, the Creditor may demand the obligation be fulfilled by the Guarantor, without first being required to sue the debtor or obtain judgement against the Debtor and satisfy his claim from the Debtor’s assets. The Guarantor generally retains his rights to sue the Debtor and recover the amount he may have paid to the Creditor.
Specifications of this agreement
Before completing this agreement, please collect:
- Name and address of Guarantor
- Names of Creditor and Debtor
- Determine if the Guarantor’s liability should be capped at a certain amount
- If the Guarantor is a corporation, the date on which the Board of Directors authorized the corporation to enter into the Guaranty is required.
- Name of Witness (if you choose to have this Guaranty witnessed)
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