The terms warranty and guarantee are often used interchangeably, but they have subtle differences.
The key differences between a Guarantee and a warranty are;
- The guarantee covers product, service, persons, and consumer satisfaction while the warranty covers products only.
- A guarantee is a commitment and a warranty is considered the assurance to the customer
- The guarantee can be oral as well as written whereas the warranty is in written form.
A warranty is a written assurance almost similar to a guarantee that a manufacturer or similar party assures the buyer in writing that if their product fails to meet certain specifications, a remedy is available within a specified warranty period.
Warranty describes the conditions and situations in which free repairs or exchanges will be made if the product is defective. Warranties characteristically apply to products that have not been altered or modified by third parties after they were purchased.
There are different types of Guarantees mainly product performance guarantees, third-party guarantees, and bank guarantees. In the case of manufactured products, the product performance guarantee has been offered where the manufacturer is more confident about his product quality. A product performance guarantee is a promise made that the product service lives up to certain expectations, or that a product will continue to perform well over a stated time period. If it doesn’t, the manufacturer or service provider will fix or replace it. Unlike warranty, a guarantee comes with an assurance that if a product cannot be repaired and there is no product to be replaced, then the money paid by the buyer will be refunded.
A third-party guarantee is a promise made by a person or an organization to accept responsibility for some other party’s debt if the debtor fails to pay it.
Banks are offering different types of guarantees on behalf of their customers which can be broadly classified as (i) Financial Guarantees and (ii) Performance guarantees. Earnest money Deposit guarantee or Bid Bond Guarantee, Guarantee for Payment of Customs duty (specific or continuing), Advance Payment Guarantee (APG), Deferred Payment Guarantee (DPG), Shipping Guarantee, Performance Guarantee, Retention Money guarantees, etc. The bank which has to discharge the financial liability of the contract agreed to the guarantee or if the contract is partly or fully not performed by the customer. The details of each type of guarantee mentioned above are described in the following post.