Under a contract of guarantee, when is the guarantor's liability activated?

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Multiple Choice

Under a contract of guarantee, when is the guarantor's liability activated?

A contract of guarantee creates a secondary obligation. The guarantor’s liability only comes into play if the principal debtor fails to perform the obligation when it is due. In practice, the creditor must first seek recovery from the principal debtor; only after a default occurs can the guarantor be called upon to satisfy the debt. If the debtor pays on time, the guarantor’s liability never activates. So the trigger is the default of the principal debtor.

A contract of guarantee creates a secondary obligation. The guarantor’s liability only comes into play if the principal debtor fails to perform the obligation when it is due. In practice, the creditor must first seek recovery from the principal debtor; only after a default occurs can the guarantor be called upon to satisfy the debt. If the debtor pays on time, the guarantor’s liability never activates. So the trigger is the default of the principal debtor.

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