GUARANTEE, or Guaranty, in English law, is a promise to be answerable for the debt of another should he fail to make payment, or generally to be answerable for the performance of any duty by another person. The debt or duty must be owing by another, who is primarily bound, and the guarantor is only liable in the event of his failure of performance. Guarantees are required to be in writing by the Statute of Frauds (29 Car. II. c. 3), which enacts (§ 4) that “no action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another, unless the agreement upon which such action shall be brought shall be in writing, signed by the parties to be charged by the contract, or some other person thereunto by him lawfully authorized.” The test of the applicability of this section is whether the original debtor continues liable. If his liability is gone, and the person promising to pay the debt becomes immediately and primarily liable, then the promise need not be in writing. Thus where a debtor had been taken in execution for a debt, and a third person promised to pay the debt if the debtor were discharged from custody, it was held that writing wa3 not necessary, inasmuch as the discharge operated as a satisfaction of the original debt, and the person making the promise alone remained liable. The default for which liability may be assumed by another person includes any case of breach of duty, and is not confined to cases of non-performance of contracts. A promise to guarantee comes under the general rule which requires enforceable agreements to be founded on consideration, i.e., a corresponding promise or performance on the other side (see Contract). It was formerly held that the consideration must appear in ...the memorandum of writing, not necessarily in express term3, but at any rate as a matter of fair and reasonable inference. Thus a promise to pay for goods to be supplied to another was held to disclose a consideration, viz., the future supply of goods. But when the promise was to pay for goods already supplied, no consideration was disclosed. By the Mercantile Law Amendment Act (19 and 20 Vict. c. 97), passed in consequence of representations made by merchants in Scotland and the North of England, who found the difference between Scotch and English law as to written contracts a source of great inconvenience, this section of the Statute of Frauds was repealed. The Mercantile Law Amendment Act also declares that a guarantee given to or for a firm shall cease on any change taking place in the persons constituting the firm, unless a continuance of the promise is expressly stipulated or of necessity to be inferred. The corresponding Act for Scotland (19 and 20 Vict. c. 60) requires all guarantees, securities, or cautionary obligations, and all representations as to the character of any person made with the view of obtaining credit, money, &c., for such person to be in writing in order to be binding, and establishes the same rule as the English Act with reference to guarantees to or for a firm.
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