A guaranty is a contract under which one person agrees to pay a debt or perform a duty if the other person who is bound to pay the debt or perform the duty fails to do so. A guaranty of the payment of a debt is different from a guaranty of the collection of the debt. A guaranty of payment is absolute while a guaranty of collection is conditional.
Arizona Guaranty of Collection of Promissory Note is a legal document that outlines the terms and conditions under which a guarantor agrees to guarantee the collection of a promissory note in the state of Arizona. This document establishes a secondary obligation for the guarantor to ensure the repayment of the debt in the event that the borrower defaults on the promissory note. The Arizona Guaranty of Collection of Promissory Note is an essential instrument for lenders and creditors seeking additional security and protection in loan transactions. By having a guarantor, the lender minimizes the risk of non-payment by having a secondary party liable for the debt. This further ensures the lender's ability to collect the funds owed. Different types of Arizona Guaranty of Collection of Promissory Note may include: 1. Absolute Guaranty: This type of guaranty holds the guarantor fully responsible for the repayment of the promissory note in the event of default by the borrower. The lender can directly seek repayment from the guarantor without exhausting legal remedies against the borrower. 2. Limited Guaranty: This type of guaranty limits the guarantor's liability to a specific amount or time frame. The guarantor is responsible for the guarantee only up to the specified limit or until a set date. Any amount exceeding the limit is the sole responsibility of the borrower. 3. Continuing Guaranty: A continuing guaranty ensures that the guarantor's obligation remains in effect until specifically revoked by written notice from the guarantor to the lender. This type of guaranty is useful when a borrower may enter into multiple loans or create various promissory notes over time, as it provides ongoing protection for the lender. 4. Limited Recourse Guaranty: This type of guaranty limits the lender's recourse to specific assets or collateral identified in the document. If the borrower defaults, the lender can pursue the specified assets identified in the guaranty for repayment. When drafting an Arizona Guaranty of Collection of Promissory Note, it is crucial to include the following key elements: 1. Parties involved: Clearly identify the parties to the guaranty, including the lender, borrower, and guarantor, with their complete legal names and addresses. 2. Promissory note details: Specify the details of the promissory note being guaranteed, such as the principal amount, interest rate, repayment terms, and maturity date. 3. Guarantor's obligations: Clearly outline the guarantor's obligations and responsibilities, including the guarantee of repayment, indemnification, and any limits or conditions applicable to the guaranty. 4. Default provisions: Establish the events that would constitute a default on the promissory note, such as non-payment, bankruptcy, or material breach of the loan agreement. 5. Termination and revocation: Include provisions outlining the circumstances under which the guaranty can be terminated or revoked, and the process for providing notice to the lender. 6. Governing law and jurisdiction: Specify that the guaranty is governed by the laws of the state of Arizona and identify the jurisdiction where any disputes will be resolved. An Arizona Guaranty of Collection of Promissory Note provides lenders with an added layer of security by ensuring the guarantor's liability in case the borrower fails to repay the promissory note. However, it is essential for all parties involved to consult with legal professionals familiar with Arizona state laws to ensure the document's accuracy and compliance with relevant regulations.
