If you’re a business professional, you’ve likely heard the term “guarantee” used in various contexts but may not be sure of its exact definition. Guarantees are promises or commitments made by one party to another that something in particular may or will be performed. These assurances can be legally binding and are intended to create a mutual expectation between both parties, ensuring each party meets its obligations.
A guarantee can take on many forms but, typically, will involve some sort of financial arrangement or promise to adhere to a certain standard, such as in the case of a service or product guarantee. These assurances can be written or verbal and may be legally enforceable or just a representation of intent.
For instance, a car dealership offering a guarantee that the vehicle is free from defects or remains free of defects for a certain period of time could be an example of a legally enforceable guarantee. The same vehicle dealership touching on the responsiveness of the service provided when such a guarantee is invoked would be an example of a non-legally enforceable guarantee.
What Are the Benefits of a Written Guarantee?
In any commercial relationship, guarantees provide assurance to the recipient that they won’t be left empty-handed. From a consumer protection perspective, written guarantees can serve as a powerful tool to ensure both sides are operating in good faith. Written guarantees can also provide a solid foundation for an individual to seek compensation should their expectations not be met.
Further, these written contracts can help define boundaries between two parties, offering clarity on issues such as liability and expectations of both parties. Because of the potential for legal action that written guarantees can provide, being clear and concise — and using understandable language — is key for businesses that are relying on such promises.
What Is Not Included Under a Guarantee?
A guarantee should never be used in place of an insurance policy or as a substitute for another contract. Guarantees are distinct documents that provide specific rights and protections to the holder, and must never be used to replace legal requirements such as warranties, agreements, or promises.
Guarantees can also oftentimes have limits and certain conditions attached to them, so it’s important to read the fine print before forming any legal expectations. Also, remember that guarantees can differ from state to state and from one jurisdiction to another, so knowing the specific laws of your area is important when considering such a contract.
The True Meaning of Guarantee: Protect Yourself
Whether you’re a business professional in the market for a new product or service, or a consumer looking for protection, understanding the true meaning of guarantee can provide important benefits. Knowing how to properly assess a guarantee and determine its parameters will help protect both parties from any legal wrangling should the terms not be met.