Commercial Law

Question 1

Define a Guaranty

Answer 1

A person, called a guarantor, binds himself to the creditor to fulfill the obligation of the debtor in case the latter should fail to do so

Question 2

Guarantor’s amount of debt

Answer 2

A guarantor or surety may bind himself for LESS, but NOT FOR MORE than the principal debtor both as regards of the amount and the onerous nature of the conditions

Question 3

May there be a guaranty for a future debt?

Answer 3

Yes, a guaranty or surety may also be given as security for future debts, the amount of which is not yet known. There can be no claim against the guarantor or surety until the debt is liquidated

Question 4

Qualifications of a guarantor

Answer 4

1. He must possess integrity
2. He must have capacity to bind himself
3. He must have sufficient property to answer for the obligation which he guarantees

Question 5

Benefit of Excussion

Answer 5

The liability of the guarantor shall be subsidiary. The guarantor cannot be compelled to pay the creditor unless:

1. The creditor has exhausted all the property of the guarantor; and
2. The creditor has resorted to all the legal remedies against the debtor

Question 6

Characteristics of Guaranty

Answer 6

1. Gratuitous
2. Accessory
3. Subsidiary
4. Conditional
5. Unilateral
6. Express
7. Covered by Statute of Frauds

Question 7

Amount of Guaranty

Answer 7

A guarantor or surety may bind himself for LESS but NOT FOR MORE than the principal debtor. Should he have bound himself for more , his obligations shall be reduced to the limits of that of the debtor

Question 8

When the benefit of excussion is not available

Answer 8

1. If the guarantor expressly renounced it
2. If he has bound himself solidarily with the debtor
3. In case of insolvency of the debtor
4. When he has absconded, or cannot be sued within the Philippines unless he has left a manager or representative
5. If the guarantor did not set it up against the creditor upon the latter’s demand for payment from him
6. If the guaranor did not point out to the creditor available property of the debtorwithin the Ph. Territory

Question 9

Notice to the guarantor

Answer 9

To make the guarantor liable the creditor must:
1. File a case against the debtor alone
2. The creditor must ask the court to NOTIFY the guarantor