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in civil law an obligation, based on law or on contract, by which a natural or juridical person is fully or partially liable to a creditor in the case of nonfulfillment or improper fulfillment of an obligation by a debtor.
In Soviet law, guaranty is an independent measure to safeguard the fulfillment of obligations by socialist organizations. A legal form like the guaranty is necessary because other means of securing obligations, such as a forfeit fixed by the contract, a pawn, earnest money, and suretyship, cannot be used for certain obligations, in particular, obligations resulting from a bank loan contract.
The content of the guaranty obligation consists of the right of the bank to have its loan to the debtor organization paid off by the bank’s special order in nondisputable proceedings, either by writing off the sum from the account of the guarantor organization or by recovery from assets belonging to the latter. A subsidiary (not joint but supplementary) liability of the guarantor originates through the guaranty. The guarantor is obligated to fulfill the obligation in place of the debtor only when the latter has failed to satisfy the claim of the creditor. The extent of the guarantor’s liability is usually limited to the amount of payment missed by the debtor organization on the day when the claim of redemption of the loan is presented.
The guaranty may secure an actual or a potential claim of the creditor toward the debtor; it is used as a means of securing the fulfillment of the obligation and as a credit sanction.
E. G. POLONSKII