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Simple English definitions for legal terms
irrevocable guaranty
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A quick definition of irrevocable guaranty:
An irrevocable guaranty is a promise made by one person to pay or perform a duty if another person fails to do so. It is a type of contract that is usually used in finance and banking. The guaranty is collateral, meaning it is a backup plan to protect the person who is owed money. It cannot be terminated without the consent of all parties involved.
A more thorough explanation:
Definition: An irrevocable guaranty is a written promise made by one party to another party to pay a debt or perform a duty in case the primary obligor fails to do so. It is a type of guaranty that cannot be terminated without the consent of all parties involved.
Examples:
- An individual guarantees to pay the rent for their friend's apartment if their friend fails to make the payments. This is an example of an irrevocable guaranty because it cannot be terminated without the consent of all parties involved.
- A company guarantees to pay a supplier for goods received if the buyer fails to make the payment. This is also an example of an irrevocable guaranty because it cannot be terminated without the consent of all parties involved.
These examples illustrate the definition of an irrevocable guaranty because they both involve a written promise made by one party to another party to pay a debt or perform a duty in case the primary obligor fails to do so. Additionally, both examples cannot be terminated without the consent of all parties involved, making them irrevocable guaranties.