A guarantee under which the guarantor promises to pay an amount owed by the principal obligor to the beneficiary if the principal obligor fails to pay it. This means that the guarantor is only under an obligation to pay if the principal obligor breaches its obligation. A conditional payment guarantee is a secondary obligation that is dependent on the primary agreement between the principal obligor and the beneficiary.

If the principal obligor fails to perform the guaranteed obligation, the beneficiary has a claim in debt (a contractual right to payment) against the guarantor. For an example of this type of guarantee, see Guarantee and indemnity: corporate guarantor, all monies: clause 2.1.