GUARANTY, or GUARANTEE, a con tract or undertaking by which one agrees to answer legally for the default of another. One who undertakes such a contract is called a guarantor. In Great Britain and in some juris dictions of the United States, the word "guar antor)) is used with a broader signification than in other jurisdictions, generally being nearly or quite equivalent to the word "surety?' Usually a guaranty relates to the payment of money or its collectibility or the genuineness of an obli gation, and is a collateral undertaking. Guar anty has been treated as a branch of suretyship. Ordinarily the contract of a guarantor is dis tinguished from that of a surety, in that the former is a distinct from that of his principal, whereas the contract of a surety is made jointly and at the same time as his principal. Further more, it has been held that the guarantor be comes liable only by the happening of a con tingency after the contract is made, whereas the surety is liable from the time of the signing of such contract. The guarantor, according to some authorities, agrees only to pay on notice if his principal cannot, whereas a surety agrees to pay if his principal does not. On the other hand, some authorities hold that the difference between the contract of a guarantor and the contract of a surety is shadowy, and what is called by some courts a contract of guaranty is called by others a contract of suretyship.
Guaranty, although like warranty a collateral undertaking, must not be confused with that term, a warranty being merely an undertaking that a certain fact is as represented. Ordinarily contracts both of guaranty and suretyship must be evidenced by a written memorandum to comply with the provisions of the statute of frauds, both being undertakings to answer for the default of another. A contract of guar anty, to be valid, must be for a sufficient legal consideration. Failure of consideration is a good defense by the guarantor. Fraud prac tised on the guarantor by the principal is no defense to a contract of this nature unless the creditor has participated therein. The same rules of construction apply to contracts of guaranty as to other contracts, the apparent in tention of the parties, as gathered from the contract, being the controlling factor. Usually the default of the principal alone does not fix the liability of the guarantor, but the creditor must use reasonable efforts to collect the debt of the principal, and upon failure to do so must give the guarantor due notice. See Com TRACT ; SURETY ; WARRANTY.