Gdańsk
South Baltic Gas Forum
5 - 9 September 2011, Gdańsk, Poland

Guarantee

Guarantee is a legal term more comprehensive and of higher import than either warranty or "security". It most commonly designates a private transaction by means of which one person, to obtain some trust, confidence or credit for another, engages to be answerable for him. It may also designate a treaty through which claims, rights or possessions are secured. It is to be differentiated from the colloquial "personal guarantee" in that a Guarantee is a legal concept which produces an economic effect. A personal guarantee by contrast is often used to refer to a promise made by an individual which is supported by, or assured through, the word of the individual. In the same way, a guarantee produces a legal effect wherein one party affirms the promise of another (usually to pay) by promising to themselves pay if default occurs.
In English law, 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. It is a collateral contract, which does not extinguish the original obligation for payment or performance and is secondary to the primary obligation. It is rendered null and void if the original obligation fails. Two forms of guarantee exists in England, 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. 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 second requisite is Lord Tenterden's Act which enacts that "no action shall be brought whereby to charge any person upon or by reason of any representation or assurance made or given concerning or relating to the character, conduct, credit, ability, trade or dealings of any other person, to the intent or purpose that such other person may obtain credit, money or goods upon unless such representation or assurance be made in writing signed by the party to be charged therewith". Lord Tenterden's Act, which applies to incorporated companies and to individual persons, was rendered necessary by an evasion of the statute of frauds, treating the guarantee for a debt, default or miscarriage, when not in writing as a fraudulent representation, giving rise to damages for a tort.
As regards the kind of note or memorandum of the guarantee that will satisfy the statute of frauds, "no special promise to be made, by any person after the passing of this act, to answer for the debt, default or miscarriage of another person, being in writing and signed by the party to be charged, or some other person by him thereunto lawfully authorized, shall be deemed invalid to support an action, suit or other proceeding, to charge the person by whom such promise shall have been made, by reason only that the consideration for such promise does not appear in writing or by necessary inference from a written document." Any writing embodying the terms of the agreement between the parties and signed by the party to be charged is sufficient; and the idea of agreement need not be present to the mind of the person signing. It is, however, necessary that the names of the contracting parties should appear somewhere in writing; that the party to be charged, or his agent, should sign the agreement or another paper referring to it; and that, when the note or memorandum is made, a complete agreement shall exist. The memorandum need not be contemporaneous with the agreement itself.
The German code civil requires the surety's promise to be verified by writing where he has not executed the principal obligation. The Portuguese code renders a guarantee provable by all the modes established by law for the proof of the principal contract According to most civil codes civil a guarantee like any other contract can usually be made verbally in the presence of witnesses and in certain cases (where for instance considerable sums of money are involved) sous signature privee[jargon] or by a judicial or notarial instrument. The French and Belgian Codes, moreover, provide that suretyship is not to be presumed but must always be expressed.

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