A guarantee involves three parties. One party (the guarantor) promises to answer for the obligations which a second party owes to a third party. If the second party defaults, the guarantor assumes the responsibilities or obligations owed to the third party. A guarantee attaches to the work, obligations or goods of a person other than the guarantor.
A guarantee is, in itself, a type of contract. The most common situation where a guarantee will be called for is where a person borrows money from a bank or finance company and a condition of the loan involves a third party guaranteeing repayment of the debt.