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Guarantee
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Guarantee
A guarantee is a form of transaction in which one person, to obtain some trust, confidence or credit for another, agrees to be answerable for them. 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 legal terminology, the giver of a guarantee is called the surety or the "guarantor". The person to whom the guarantee is given is the creditor or the "obligee"; while the person whose payment or performance is secured thereby is termed "the obligor", "the principal debtor", or simply "the principal".
Sureties have been classified as follows:
Guarantee is sometimes spelt "guarantie" or "guaranty". It is from an Old French form of "warrant", from the Germanic word which appears in German as wahren: to defend or make safe and binding.
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:
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, except in certain cases where the discharge of the principal debtor is by the operation of the law. 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. 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.
No special phraseology is necessary to form a guarantee. What distinguishes a guarantee from insurance is not any difference between the words "insurance" and "guarantee", but the substance of the contract entered into by the parties.
The statutory requisites of a guarantee are, in England, prescribed firstly by the statute of frauds, which provides in section 4 that "no action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriages of another person, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized". This in effect means that a guarantee is not invalid but are merely unenforceable through a chose in personam.[clarification needed] The requirement for a signature in writing was clarified in Elpis Maritime Co v. Marti Chartering Co Inc (the "Maria D") [1992] 1 AC 21 and J Pereia Fernandes SA v. Mehta [2006] EWHC 813 (Ch). In the former, an agreement had been signed by a party purporting to have signed only as an agent, but this fact was considered insignificant. In the latter, it was held that a contract was enforceable either by written agreement signed by the guarantor or his agent OR; if the guarantee was oral, a separate note or memorandum of the agreement could make the guarantee similarly enforceable. In the former, the court held it was sufficient that it was written or printed by the guarantor, an initial within an email was sufficient but a standard header name in an email was not. The court believed that the minor action was sufficient to engage the Statute as it had long been held that a single fingerprint, or "X" was sufficient. The Electronic Communications Act 2000 created a power to issue statutory instruments to modify legislation so as to be congruent with modern use of electronic communications. This is congruent with Article 9 of the EU Directive on Electronic Commerce 2000, this specifically allowed exceptions to the 'in writing' requirement of a guarantee. It has even been held that clicking a button to confirm personal details sufficiently discharges the Statute of Frauds requirement.
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Guarantee
A guarantee is a form of transaction in which one person, to obtain some trust, confidence or credit for another, agrees to be answerable for them. 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 legal terminology, the giver of a guarantee is called the surety or the "guarantor". The person to whom the guarantee is given is the creditor or the "obligee"; while the person whose payment or performance is secured thereby is termed "the obligor", "the principal debtor", or simply "the principal".
Sureties have been classified as follows:
Guarantee is sometimes spelt "guarantie" or "guaranty". It is from an Old French form of "warrant", from the Germanic word which appears in German as wahren: to defend or make safe and binding.
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:
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, except in certain cases where the discharge of the principal debtor is by the operation of the law. 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. 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.
No special phraseology is necessary to form a guarantee. What distinguishes a guarantee from insurance is not any difference between the words "insurance" and "guarantee", but the substance of the contract entered into by the parties.
The statutory requisites of a guarantee are, in England, prescribed firstly by the statute of frauds, which provides in section 4 that "no action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriages of another person, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized". This in effect means that a guarantee is not invalid but are merely unenforceable through a chose in personam.[clarification needed] The requirement for a signature in writing was clarified in Elpis Maritime Co v. Marti Chartering Co Inc (the "Maria D") [1992] 1 AC 21 and J Pereia Fernandes SA v. Mehta [2006] EWHC 813 (Ch). In the former, an agreement had been signed by a party purporting to have signed only as an agent, but this fact was considered insignificant. In the latter, it was held that a contract was enforceable either by written agreement signed by the guarantor or his agent OR; if the guarantee was oral, a separate note or memorandum of the agreement could make the guarantee similarly enforceable. In the former, the court held it was sufficient that it was written or printed by the guarantor, an initial within an email was sufficient but a standard header name in an email was not. The court believed that the minor action was sufficient to engage the Statute as it had long been held that a single fingerprint, or "X" was sufficient. The Electronic Communications Act 2000 created a power to issue statutory instruments to modify legislation so as to be congruent with modern use of electronic communications. This is congruent with Article 9 of the EU Directive on Electronic Commerce 2000, this specifically allowed exceptions to the 'in writing' requirement of a guarantee. It has even been held that clicking a button to confirm personal details sufficiently discharges the Statute of Frauds requirement.