GUARANTY, or GUARANTEE (OF., Fr. garantie, from garantir, to warrant, from garant, guarant, warant, warrant, from OHG. giweren, Ger. gewahren, to grant). In its broadest sense, a contract by which one becomes legally liable for the debt, default, or miscarriage of another. In this sense, it is used interchangeably with suretyship (q.v.). Frequently it bears a nar rower signification, denoting a contract to pay money or do an act upon the failure of to pay or to do. In the former case the principal debtor and the guarantor or surety are bound, ordinarily by a single contract to the third per son. In the latter case the guarantor's contract with the third person is separate and distinct from his principal's contract. A promissory note signed by A and B for A's debt is an example of the first class. A promissory note by A for his debt to which B adds a separate contract, by which he guarantees the payment of the note, illustrates the second class. There is some au thority for the use of guaranty in a third and still narrower sense—as an undertaking, by the guarantor, to pay if the principal cannot; that is, to pay only upon proof of the principal's insolvency. If the guarantor's agreement is made
at the same time with that of the principal, the same consideration will answer for both; but a guaranty of an existing debt or liability requires a new and distinct consideration.
At common law, a guaranty was equally en forceable whether written or oral. By sec. 4, ch. 3, 29 Charles II. (see FRAUDS, STATUTE OF) it must be in writing and signed by the party to be charged or his authorized agent. if it is "a special promise to answer for the debt, default, or miscarriage of another person." Ordinarily, a guaranty is such a promise, and thus within the statute; but it often happens that a trans action which partakes of the nature of a guaran ty does not fall within the statute. The rules governing the construction of guaranties, the discharge of guarantors, and their rights against their principals will be considered under SURETY Consult! Brandt, Suretyship and Guaran ty (Chicago, 1891) ; De Colyar, Law of Guaran tees and of Principal and Surety (3d ed., London, 1897) ; and the authorities referred to under CONTRACT.