A letter of guaranty (sometimes spelt guarantee) is commonly issued by banks on behalf of a client, to reassure a supplier that payment for goods will be made. In some cases the bank will promise to meet payments, even if their client defaults. This gives two parties who may have previously not done business together the added security to do so.
A similar document may be issued on behalf of a call writer, when their underlying asset isn’t held in the account, giving reassurance that the asset will be delivered if the call is exercised.
Letters of guaranty are used in many other scenarios as a way to assure continued high standards, that an obligation will be met, or a rule will be adhered to. For example companies subject to Food and Drug Administration regulations may use a letter of guaranty to certify that their products meet the standards of the law.
A letter of guaranty is often used with checks, where a bank will guarantee the funds will be available – up to a certain amount – to be withdrawn using a check on a certain account. This document is just another level of safety for people doing business with an individual, knowing they have available funding. It is especially important when paying by check for purchases over $1000.
RE: Manuel Baptiste
This letter serves as a guarantee that the Royal Bank of Canada will irrevocably guarantee payment of any checks written on Manuel Baptiste’s account up to and including the amount of $5,000. The funding is available to come from account #544674.
There will be no stop payments issued. If you cash this check before December 16th, 2009, the money will be there.
This guarantee is for the purpose of Manuel Baptiste purchasing a new car on or before December 16th, 2009.
If you need any more information about this letter, please contact the Royal Bank of Canada at 243-342-3423.
Wholesome Foods International hereby guarantees that all chocolate products delivered to the buyer shall at the time of delivery, comply in all respects with the Federal Food Drug and Cosmetic Act, and subsequent amendments, and are not adulterated or misbranded within the scope of the Act, and none such products will be introduced to interstate commerce.
The guarantees given herein are continuing and shall be in full force and effect until revoked in writing.
Mr. Kort Fossi
Wholesome Foods Quality Assurance