The guarantee is the contract by which a person (guarantor) guarantees, with his own assets, the fulfillment of an obligation contracted by another person. This is the most classic of the definitions that can be given for the bank guarantee.

A surety agreement will have to be stipulated in different cases, but the aim will always be the same: to have a guarantee for a loan of money. The bank guarantee policies are in fact designed for this reason.

However, there are different types of guarantee, based on the needs that the contractor has. The underlying meaning, however, always remains the same, as does the purpose of this insurance contract.

 

Guaranty: what it is and how it works

 

The surety is an insurance policy that is taken out as a personal guarantee. With this contract, the guarantor is personally obliged to the creditor of a third party.
In this way, the creditor protects himself further from his debtor.
The difference with the pledge and mortgage is very great, since the guarantee is not made up of a specific asset, but from the entire patrimony of a person, the guarantor.

As for the form required for the stipulation of the surety agreement, the law does not require formal requirements. However, the will to oblige must be clearly expressed by the guarantor so that the limits and content of the guarantee are evident.
There are also different types of surety policy, but all are regulated by article 1936 of the Italian civil code, which states:

A guarantor is the one who, personally obliging himself towards the creditor, guarantees (unilateral promise) the fulfillment of an obligation of others. The surety is effective even if the debtor has no knowledge of it.

Let's now see in detail the two different types of surety policy: insurance and banking.

 

Bank and insurance guarantee: differences

 

The guarantee policy has the purpose of being a guarantee of payment. So far the situation should be quite clear.
However, there are two different types of policy, which depend on the credit institution with which the contract was entered into.

The bank guarantee is the contract that the guarantor enters into with the bank, which takes on the burden of paying the amount owed by the guarantor in the event that he cannot pay.
Put simply, he guarantees the sum that a third person is lending to him.

The insurance guarantee is instead stipulated with an insurance, which takes the same burden as the bank.
The company then takes responsibility for the credit and in the event of insolvency will guarantee the sum.

This type of policy is often requested in competition notices at European level and is stipulated between the winner and the body that has to pay it. The winner agrees to respect the agreements and the body to pay the money instead. In case one of the two subjects does not respect the agreements, the insurer will intervene.

 

Guaranty: the obligations of the contract

 

The effect produced by the surety is the joint and several liability of the debtor and guarantor towards the creditor.
This means that the creditor can, at his discretion, demand payment of the debt from one or the other, without having to contact the principal debtor first.

This must instead occur when this is expressly provided for in the surety agreement and in this case there is talk of the benefit of prior enforcement of the so-called main debtor.
The guarantee does not necessarily have to be given to guarantee the entire debt, since it can also be provided for only part of the debt.

The creditor loses his right to the guarantor if, in the event of expiry of the principal debt, he does not take legal action against the debtor or the guarantor himself, within six months of said expiration.

 

Guaranty: what types exist?

 

We have previously seen that there may be two different entities with entering into a bank guarantee. Let's now see the two different types of surety that can be contracted. Lenders usually offer only two options:

 

• joint and several surety: entered into between two or more banks that undertake to discharge the debts of the contractor. In this option, however, there is a maximum expenditure ceiling, within which the guarantor is not obliged to intervene;

• surety with execution benefit: bank and beneficiary are tied only for the residual amount. With this particular formula, the debtor must also contact the beneficiary before the bank in case of non-payment.

Both these types of surety obviously have a cost, which must be paid by the debtor. First of all, the debtor will have to put a certain amount as a guarantee and will also have to pay commissions and costs of the policy.

Usually for a surety policy there is a commission of 1%, to which must then be added the interest rates which are variable.
The interest rates of a surety policy can in fact fluctuate between 0.75% per month up to 3%.

 

Guaranty: clauses to be known

 

To conclude this guide to the bank and insurance guarantee, we have decided to insert a series of keywords that may be useful to you. In fact, these terms are often found for policies of this type and knowing their meaning is indispensable.

Below you will find a list of terms that may be useful when taking out a policy of this type.

 

Guaranty accessory

The guarantor's obligation is ancillary to that of the principal debtor and is valid only if the guaranteed obligation is valid, unless it has been provided to guarantee the obligation of an incapacitated subject.

If the debt of others is missing, for example because the contract from which it was derived is declared void, the guarantee is also canceled. Furthermore, the surety cannot exceed what is owed by the principal debtor.

 

Guaranty omnibus

There is talk of an "omnibus guarantee" when the guarantor guarantees all the obligations that a party will assume towards another party.

 

Extinction of the guarantee

If the creditor turns to the principal debtor and pays him, the principal obligation and consequently the surety are extinguished.

 

Regression action

If the creditor turns to the guarantor, the latter has a right of recourse against the debtor for the repayment of the amount paid; The right of recourse ceases to exist in the event that the guarantor does not give notice of the payment to the debtor who subsequently provides for it. In fact, the guarantor has the burden of informing the debtor that he has taken steps to extinguish the obligation.

With the right of recourse the guarantor can act to obtain the repayment of the capital, interest and expenses incurred by him to make the payment.