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What is the difference between a deposit and a guarantee?

Difference between deposit and a guarantee

A deposit and a guarantee are forms of financial security, however there are some key differences between the two:

  • Legal nature: The guarantee is governed by the Commercial Code, while the bond is regulated by the Civil Code.
  • Scope of application: The guarantee is used mainly in commercial operations, such as bank loans and bills of exchange. The deposit, on the other hand, has a broader scope and is applied in various contracts and legal obligations, such as lease contracts, construction contracts and public tenders.
  • Guarantor’s liability: In the guarantee, the guarantor assumes the payment obligation in case of default by the main debtor, but only in relation to the guaranteed debt. In the deposit, the guarantor assumes a broader responsibility, agreeing to fulfill all the obligations of the main debtor in case of default.
  • Form of constitution: The guarantee is constituted by means of a written statement by the guarantor, which is presented to the beneficiary of the guarantee. The deposit, on the other hand, is formalized through a specific contract in which the guarantor agrees to comply with the obligation in case of non-compliance.
  • Beneficiary: In the guarantee, the beneficiary is generally the creditor or the financial institution. In the surety, the beneficiary can be any party involved in the contract or the secured obligation, such as the lessor, the contractor or the bidding body.

In summary, the main difference between a guarantee and a bond lies in their scope of application, the scope of the guarantor’s responsibility and the form of constitution. Both are financial guarantees, but they are used in different contexts and with different legal implications.

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