Duhaime's Law Dictionary


Guarantor Definition:

A person who pledges payment or performance of a contract of another, but separately, as part of an independently contract with the obligee of the original contract.

Related Terms: Surety

A person who pledges collateral for the contract of another, but separately, as part of an independently contract with the obligee of the original contract.

Compare with surety or indemnity.

In Mutual Finance v Politzer, Justice Silbert of the Court of Appeals of Ohio wrote:

"(A) guarantor is not an original contractor and, therefore, is not primarily liable, as is a surety."

In National Bank v Rosario, Justice Feehan of the Albert Court of Queen's Bench:

"The relationship between the guarantor and the creditor is based on contract and is therefore governed by the terms in that contract. The guarantor guarantees the loan between the creditor and the principal debtor and at common law any material change in that contract would release the guarantor."

In the Nova Scotia Supreme Court, Justice Nathanson presiding, these words were published in Confederation Life Insurance v. Rayter Management:

"A guarantor is known in equity as a surety. A surety has rights which can be exercised against the creditor of the principal debtor whose debt the surety has guaranteed. One of those rights is the right of subrogation, which may be described as the right, upon payment of the debt by the surety, to stand in the place of the creditor and have the benefit of all its rights.

"Among such rights is the right to the benefit of all securities held by the creditor. The surety is entitled to the immediate transfer of all securities held by a creditor in exactly the same condition in which they were originally received.

"Applying all this to the law of mortgages, the rule may be stated as follows: upon payment by the guarantor of the mortgage debt, the guarantor is entitled to the benefit of all the rights of the mortgagee, including the right to the mortgage. The guarantor is entitled to an immediate assignment of the mortgage and the right to have foreclosure in its own name."

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