ancillary guaranty definition

ancillary guaranty

Performance bond or other type of guarantee in which the guarantor effectively becomes a co-signatory to the underlying contract. And, unlike in a demand guarantee (standby letter of credit), the guarantor acquires certain rights under the contract and can challenge the obligee's demand for payment of the guarantee sum. Ancillary guarantees are illegal under US law but are common in the UK and elsewhere. Also called contract guarantee.

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