Guarantees

The obligation of a guarantor was to be responsible for the contractual performance due by another person to a third. The commercial purpose of a guarantee was to ensure that the creditor was paid the debt owed to him by the debtor who was being guaranteed. English law afforded a guarantor under a guarantee of the classic type a considerable degree of legal protection. The essential characteristic of a guarantee was that the liability of the guarantor was a secondary one. It was the debtor who was primarily liable to pay. If therefore, the debtor had no liability, the guarantor had none either. The guarantor might avail himself of all the defences available to the debtor in respect of the payment sought. It was established practice to have payment guarantees that were not guarantees, properly so called, but instruments—often called demand bonds or performance bonds—by which a bank or similar institution promised to