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guarantee

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noun guar·an·tee \ˌger-ən-ˈtē, ˌgär-, ˌga-rən- also ˈger-ən-ˌtē or ˈgär-ən-, ˈga-rən-\
Updated on: 26 Jul 2017

Definition of guarantee

  1. 1 :  guarantor

  2. 2 :  guaranty 1

  3. 3 :  an assurance for the fulfillment of a condition: such asa :  an agreement by which one person undertakes to secure another in the possession or enjoyment of somethingb :  an assurance of the quality of or of the length of use to be expected from a product offered for sale often with a promise of reimbursement The washer comes with a guarantee against major defects.

  4. 4 :  guaranty 4

Examples of guarantee in a Sentence

  1. And as key pieces of the infrastructure are knocked out, there is no guarantee that they will be repaired or rebuilt, at least not as they were before. —Naomi Klein, Harper's, October 2007

  2. It might be no bad thing if the Constitution's guarantee of “equal protection of the laws” was interpreted to outlaw the vagaries of voting … —Michael Kinsley, New York Times Book Review, 5 Nov. 2006

  3. Collecting can be a sort of love-sickness. If you begin collecting living things,  … even if you manage to find them and then possess them, there is no guarantee they won't die or change. —Susan Orlean, New Yorker, 23 Jan. 1995

  4. The washer comes with a guarantee against major defects.

  5. They wanted a guarantee that the document was authentic.

  6. They want the new contract to include a guarantee of job security.

  7. The U.S. Constitution includes guarantees against unreasonable searches.

  8. He cited the First Amendment guarantee of free speech.

Recent Examples of guarantee from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'guarantee.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of guarantee

probably alteration of 1guaranty


2

guarantee

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verb guar·an·tee \ˌger-ən-ˈtē, ˌgär-, ˌga-rən- also ˈger-ən-ˌ or ˈgär-ən-ˌ, ˈga-rən-ˌ\

Definition of guarantee

guaranteed

;

guaranteeing

  1. transitive verb
  2. 1 :  to undertake to answer for the debt, default, or miscarriage of guarantee a loan

  3. 2 :  to engage for the existence, permanence, or nature of :  undertake to do or secure guarantee the winning of three tricks

  4. 3 :  to give security to guaranteed her against loss

  5. 4 :  to assert confidently I guarantee you'll like it

Examples of guarantee in a Sentence

  1. They're called change agents. They swoop in to transform stodgy institutions …  . It's a risky tack, one that guarantees large numbers of people will hate the boss's guts. —Daniel McGinn, Newsweek, 28 Feb. 2005

  2. For an incumbent President …  . The power of the office and the media coverage its holder is guaranteed for just doing his job generally give him the luxury of staying above the fray. —Joe Klein, Time, 22 Mar. 2004

  3. Voucher plans were adopted largely as a last resort, an effort to guarantee a semblance of school choice for low-income minority students in failing inner-city schools. —Jeffrey Rosen, New Republic, 18 Mar. 2002

  4. The washer is guaranteed against defects for one year.

  5. They guarantee that the diamonds they sell are top quality.

  6. He offered to personally guarantee the loan.

  7. The investment was guaranteed by the bank.

  8. I guarantee that you'll be satisfied.

  9. He guaranteed us that everything would go according to plan.

  10. Money doesn't guarantee a happy life.

  11. He guaranteed a victory in the championship game.

Recent Examples of guarantee from the Web

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'guarantee.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

Origin and Etymology of guarantee

see 1guarantee


Financial Definition of GUARANTEE

guarantee

What It Is

In general, a guarantee is a promise to take responsibility for another company's financial obligation if that company cannot meet its obligation. The entity assuming this responsibility is called the guarantor.

How It Works

Let's assume XYZ Company has a subsidiary named ABC Company. ABC Company would like to build a new plant and thus needs to borrow $10 million from a bank. The bank will probably require XYZ Company to guarantee the loan. By doing so, XYZ Company agrees to repay the loan using cash flows from other parts of its business should ABC Company be unable to generate enough cash on its own to repay the debt.

Often a parent company will guarantee bonds issued by one of its subsidiaries, but there are plenty of other situations that might involve guarantees. For example, vendors sometimes require a guarantee from a customer if the vendor is uncertain about the customer's ability to pay (this most often happens in transactions involving expensive equipment or other physical property). In these situations, the customer's bank might guarantee the customer's payment, meaning that the bank will pay the vendor if the customer does not.

Guarantors don't always guarantee the entire amount of a liability. In bond issues, for example, the guarantor might only guarantee the repayment of interest or principal, but not both. Sometimes more than one company might guarantee a security; in these cases, each guarantor is usually only responsible for a pro rata portion of the issue. In other cases, each guarantor may be responsible for other guarantors' portions if they also default on their responsibilities.

Historically, guarantors disclosed the nature and size of their guarantees in the notes to their financial statements. But in 2002 the Financial Accounting Standards Board (FASB) issued Interpretation 45, stating that guarantors must book the fair value of the guaranteed obligation as a liability on the balance sheet and that they must do so at the inception of the guarantee. Some guarantees, such as those that are accounted for as derivatives, those issued by insurance companies, and some guarantees issued by leasing companies, are exempt from this rule. It is important to note that guarantees issued between parents and their subsidiaries do not have to be booked as liabilities.

However, all guarantees must be disclosed. The guarantor must disclose the nature of the guarantee (terms, history, and events that would put the guarantor in a position to fulfill its obligation), the maximum potential liability under the guarantee, and any provisions that might enable the guarantor to recover any money paid out under the guarantee.

Why It Matters

Guarantees mitigate risk, but it is important to note that they do not make a security risk-free. After all, it is still possible that even the guarantor can default on the liability if the liability is too large or if the guarantor is already struggling for other reasons. Regardless, guarantees provide an extra layer of security, which is why guaranteed securities often get higher credit ratings.



GUARANTEE Defined for English Language Learners

guarantee

play
verb

Definition of guarantee for English Language Learners

  • : to make a usually written promise that whatever you are selling, doing, etc., is what you say it is

  • : to promise to pay for (something) if another person fails to pay for it

  • : to say (something) with great confidence


GUARANTEE Defined for Kids

1

guarantee

play
noun guar·an·tee \ˌger-ən-ˈtē, ˌgär-\

Definition of guarantee for Students

  1. 1 :  a promise that something will be or will happen as stated a guarantee against defects

  2. 2 :  something given as a promise of payment :  security


2

guarantee

play
verb guar·an·tee

Definition of guarantee for Students

guaranteed

;

guaranteeing

  1. 1 :  to make a promise about the condition or occurrence of something guarantee a car

  2. 2 :  to promise to be responsible for the debt or duty of another person I'll guarantee his loan.


Law Dictionary

guarantee

play
noun guar·an·tee \ˌgar-ən-ˈtē, ˌgär-\

Legal Definition of guarantee

  1. 1 :  guarantor

  2. 2 :  guaranty 1

  3. 3 :  an assurance that a condition will be fulfilled: as a :  an agreement by which one person undertakes to secure another in the possession or enjoyment of something b :  an assurance of the quality or of the length of use to be expected from a product offered for sale often with a promise of reimbursement

  4. 4 :  guaranty 4, 5 constitutional guarantees

guarantee

transitive verb

Origin and Etymology of guarantee

probably alteration of guaranty



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