Guarantee, in the broad sense, means any method, instrument or commitment, the accessory of a commercial contract made available or issued to a right holder, by virtue of the contract concluded, capable of providing the respective beneficiary with a certain realization of the guaranteed rights or the corresponding monetary compensation for the damage caused by the failure to realize these rights. Within the guarantees, the following involved parties are distinguished:
Is the principal debtor. The beneficiary (the contract partner) requires this contracting party to provide a guarantee. As a result, the Guarantee Officer requests a third person - the guarantor – for a guarantee.
Beneficiary of the guarantee
It is the one in whose favor the guarantor issues the guarantee.
Is the secondary debtor, the one who, in the event of default by the principal debtor, fulfills its obligations. In international exchanges, any natural or legal person possessing assets can be a guarantor (example: any company, industrial or commercial company, the state represented by the head of state, the government, the central bank, the Finance Ministry etc., the banking and financial institutions).
In order to avoid the risk of losing advanced credit amounts, specific arrangements are used in international practice to guarantee the recovery of these amounts.