Guaranty Agreement

A Guaranty Agreement (or Guarantee) is a contract in which one party (the guarantor) agrees to be responsible for the debt or obligation of another party (the primary obligor) if that party fails to perform. Personal guaranties are common in business lending when owners guarantee corporate debts, and in commercial leases when individuals guarantee business tenant obligations. The agreement specifies whether the guaranty is limited or unlimited, specific obligations covered, conditions triggering the guaranty, and any caps on liability. Guaranties can be 'payment guaranties' (guarantor pays if primary obligor doesn't) or 'collection guaranties' (guarantor pays only after creditor attempts collection from primary obligor). Signing a guaranty is a serious commitment that can put personal assets at risk for business obligations.