guaranty agreement

A guaranty agreement is a two-party contract in which the first party agrees to perform a stipulated action in the event that a second party fails to perform.

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Unlike a performance bond, which is a three-party contract purchased by the principal for the obligee's benefit, a guaranty agreement is a two-party agreement between the guarantor and the obligee and is separate from the agreement between the obligee and the principal. A guarantor is only required to complete performance after the obligee has made every reasonable and legal effort to force the principal's performance.



Guaranty bond