The Distinction Between Suretyships and Guarantees

Suretyships and guarantees are among the earliest forms of contractual obligations recognized under our law. However, they are equally essential and commercial severe documents. Moreover, it is challenging to get out of either of these documents once it is signed.
There are two main types of guarantees that exist, being:
1)       suretyship agreements; and
2)       guarantees.  
On its face, they might seem to speak of the same obligations. However, the differences between the two are striking.
In a nutshell:
1)       A surety follows;
2)       A guarantee stands alone.
Essentially, a guarantee is a promise made by one party (known as the surety or guarantor) to be answerable for the performance of some legal obligation of another party (known as the principal debtor). Guarantees can extend to any debt, default or miscarriage of another person. However, for the purposes of this article, we will explore the guaranteed obligations only insofar as it pertains to an outstanding or future debt.  
A demand guarantee gives rise to a primary obligation which is not dependent on the existence of any other debt or agreement. Therefore there are three parties to a guarantee, namely:
-          The creditor (this is the person or entity to whom the debt or obligation is owed);
-          The debtor (the person who owes the debt or obligation) and
-          The guarantor (who promises and agrees to be liable for the debt upon default).
In a demand guarantee, the guarantor undertakes a primary liability, either independently or jointly with the principal debtor. If the debtor defaults on its obligations to the creditor, a guarantee provides the creditor with an alternative source of securing performance or payment.  
A guarantee is generally conditional on the beneficiary serving demand in the required form (although this can be conditional on an event happening). A guarantee is not quite as good as cash or a letter of credit, but it is much closer to money than a suretyship, and there is far less scope for litigation about whether payment is due from the guarantor.
In certain instances, the guarantee's wording will canvas how the guarantor provides an unconditional undertaking to bind themselves as co-principal debtor. In those instances, it is submitted that such a guarantee is not a suretyship and, therefore, does not require the creditor to first try and obtain performance from the debtor. The creditor can demand payment or performance from the guarantor first.
A guarantee can only be discharged if there was performance of the principal obligation or payment by the guarantor.  
By contrast, in a contract of suretyship, the surety undertakes a secondary liability to answer for the debtor, who remains primarily liable. Generally, a suretyship occurs when a person agrees to be responsible for another person's debt.  
In other words, the sureties obligations are supplementary and can not exist in isolation.  
If a suretyship agreement has been concluded, the creditor will typically first look to the principal debtor for performance.   If the principal debtor defaults on its obligations, the creditor will turn to the surety for performance.  
Sureties and guarantees are often mentioned in the same breath and used interchangeably, but they are two different instruments with different legal and economic implications. As a principal, be well advised when issuing a guarantee on first demand and be aware of the risks that such guarantees entail.