Sixty days after date, I promise to pay B, or order, One Hundred Dollars.
Signed—A.
The back of the note contains the following statement:
I guarantee the payment of this note when due.
Signed—C.
The contract of C is that of a guarantor. If A fails to pay the note when due, and B demands payment of A, and promptly notifies C of A's failure to pay, C is liable. Technically, C need not be notified, but it is good business practice to give him notice. C's liability depends upon A's failure to pay the note when due. C's liability is a conditional one as distinguished from the liability of a surety, which is absolute.
Contracts of guaranty are commonly used in commercial affairs. In obtaining credit, contracts of guaranty are common. They may be used apart from promissory notes or negotiable instruments. Any kind of an obligation or contract of another may be guaranteed. A retail dry goods merchant desires to purchase $2,000.00 worth of goods from B, a wholesaler. B does not know A, but knows C, a friend of A. B offers to sell A the goods on credit, on condition that A furnish him a letter of guaranty signed by C. A furnishes B the following guaranty, signed by C:
Mr. B.,
New York City.
On condition that you sell A an order of goods which he may select, I hereby guarantee the payment of the amount thereof, not to exceed $2,000.00 in amount.