Guarantee of contract
a guarantee is a contract whereby the person (the guarantor) enters into an agreement to pay a debt, or effect the performance of some duty by a third person who is primarily liable for that payment or performance. The extent of the debt that the guarantor is liable to this debt is co-extensive to the obligation of the third-party.[3] It is a collateral contract, which does not extinguish the original obligation for payment or performance and is secondary to the primary obligation.[4] It is rendered null and void if the original obligation fails. Two forms of guarantee exists in England, (1) Guarantees creating a conditional payment, wherein if the principal fails, the guarantor will pay. Under this form, the guarantee is not enforceable until failure occurs.[5] (2) A "See-to-it" obligation where the guarantor's obligation is to ensure that the principal will carry out the obligation. Failure of the principal to do so will automatically make the guarantor in breach of his contractual obligation, on which the creditor can sue,The liabilities of a guarantor in law depend upon those of the principal debtor, and when the principal's obligations cease the guarantor's do too,[7] except in certain cases where the discharge of the principal debtor is by the operation of the law.[8] The co-extensive, secondary nature of the liability of the guarantor along with the fact that the guarantee is a contract to answer default, debt, or miscarriage; crucially differentiates the guarantee from an indemnity.[9] If, for example, a person wrongly supposes that someone is liable to them, and a guarantee is given on that erroneous basis, the guarantee is invalid by virtue of the law of contracts, because its foundation (that another was liable) failed.
