Legal Definitions - contingent guaranty

A contingent guaranty is a type of guarantee where the guarantor will only be liable if a specific event occurs. It is commonly used in finance and banking contexts.

• A father guarantees to pay his son's rent if the son loses his job. The father's liability is contingent on the son losing his job.
• A bank guarantees to pay a loan if the borrower defaults. The bank's liability is contingent on the borrower defaulting.

These examples illustrate how a contingent guaranty works. The guarantor is only responsible for fulfilling their obligation if a specific event occurs, such as the borrower defaulting on a loan or the son losing his job. Until that event happens, the guarantor is not liable.