Guarantorship

Guarantorship is a legal arrangement in which a guarantor agrees to be responsible for the debt or other obligation of a principal debtor if that debtor fails to perform. The guarantor provides the creditor with assurance that the obligation will be satisfied, typically through payment of money owed. A guarantorship involves three parties: the creditor, the principal debtor, and the guarantor. The guarantor’s obligation is usually secondary; the creditor must first pursue the debtor unless the agreement states otherwise. In some contexts, forms of suretyship can create primary liability.

Common forms include personal guarantees, corporate guarantees, and limited or continuing guarantees. A continuing guarantee covers multiple transactions; a limited guarantee applies to a defined amount or term. Guarantees can be unconditional or conditional as defined in the contract.

Legal effects: on debtor default, the guarantor may be required to satisfy the debt, including principal, interest, and costs. The creditor may sue the guarantor directly, and the guarantor may have subrogation rights after paying. The guarantor’s credit and finances may be affected; the guarantor may have rights of reimbursement against the debtor.

Limitations and defenses: guarantees can be discharged or reduced by releases, modifications of the debt without the guarantor’s consent, or defenses such as fraud or misrepresentation by the borrower. The enforceability of guarantees and any releases are governed by contract law and vary by jurisdiction, including statutes of limitations.

Notes: terminology varies by jurisdiction; some places distinguish guarantors from co-signers or sureties, but practical obligations depend on the specific contract.