Guarantees are frequently used to mean any transaction in which one person offers security for another’s obligation. This includes not only security bonds and promises of payments but also such devices as letters of comfort, which are morally binding only.
The common element in these agreements is that the guarantor (the bank) undertakes to be answerable for the payment of a debt or the fulfillment of an obligation in the event of default by the party primarily responsible (the customer). Thus the basic function of guarantee is to provide security.
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