In a guarantee agreement, the guarantor promises to pay the creditor compensation in the event of non-performance by a third party. Thus, the guarantor is responsible for the success, regardless of the contractual obligation between the creditor and the third party. If the third party fails to perform, the guarantee-activating event occurs and the creditor is entitled to compensation from the guarantor. Different forms of guarantee agreement exist. An example of a guarantee agreement is a delivery guarantee, where the guarantor pays compensation if the third party fails to deliver.
The guarantee agreement is governed by Art. 111 of the Swiss Code of Obligations (OR).