Both the guarantor and a guarantee run a credit risk on the client for the exercise of his right of appeal. This risk is greater for a warranty than for a warranty. Unlike the guarantee of a guarantee, the guarantor is not admitted or ceded into the rights of the creditor, even in the event of payment, which clearly increases the risk of the former. The conditions of grant will therefore be different for the two species. This is a legal practice where, when a person has entered into a loan agreement, he must sign with his deposit or a guarantee in the contract as collateral for the payment of the debt. Therefore, before signing a legal document, it is of the utmost importance to know the contract you are entering into and the debts attributed to your signature that are contained in the legal document. A guarantee is an independent and abstract obligation of the insurer or bank, separate from the principal obligation. This is a big difference from a guarantee and means that the surety cannot rely on the principal debtor`s exceptions on the basis of the underlying contract. Even if the underlying commitment is null and void, the surety must fulfill its commitment.
It is only in the case of a clear abuse of rights (interpreted in a very restrictive manner) that the surety can refuse to pay the warranty duly seized. In its analysis, the Tribunal found that “[d] it will often establish the guarantee and guarantee by the fact that the surety is for another in the joint acceptance of a guarantee and that, therefore, the word guarantee is often used interchangeably with the word surety.” 24 The court continued its analysis and found that, in Illinois, cases in which the term “security in the general sense” and those that used the term in the particular sense of the term were used.25 In general, the term “security” was used to describe a relationship in which a person assumes an obligation of another, which is also subject to an obligation or obligation to the creditor/obliged.” 26 Specifically, the guarantee was used to describe a contract in which the guarantee is primarily responsible for the debt for which it claims responsibility, as opposed to a surety which is only liable if the delay is made by the party whose commitment is guaranteed.27 The Tribunal therefore concluded that the concept of security “has more than a general meaning”. 28 The concept of guarantee could relate to any situation in which one person has agreed to be held responsible for the fault of another, whether the liability is primary or secondary.29 In modern use, the notion of warranty has largely replaced security. A long-time business client calls you with a question about a contract he will enter into on behalf of his company. The party with whom he enters into a contract requires that the contract include either your client`s personal guarantee or that your client act as collateral for all debts of the contract. As a layman, your client doesn`t know the difference between a personal guarantee and a warranty, so he wants you to explain the difference. This article will do so while focusing on the recent case of the Second District Appellate Court, JP Morgan Chase Bank, N.A. v. Earth Foods, Inc.,1, which blurs the line between the two.