Guaranty - Personal Guaranty and Surety Flashcards
What is a contract of guarantee? How about a contract of suretyship?
A contract of guarantee is where a guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so.
A contract of suretyship on the other hand, is where a surety binds himself solidarily with the principal debtor.
With regards to the nature of a contract of guarantee, what are the rules?
A contract of guarantee is only an accessory or subsidiary contract. Meaning, it cannot exist without a principal obligation, but nevertheless, it may be constituted to guarantee the performance of a voidable or an unenforceable contract.
What is the rule with regards to the consideration of a contract of guarantee?
Generally, a contract of guarantee is gratuitous, unless there is a stipulation to the contrary.
When is a contract of guarantee perfected?
A contract of guarantee is consensual, meaning it is perfected upon the agreement between the parties.
However, a contract of guarantee may also be entered into without the knowledge or consent, or against the will of the principal debtor. In this case, the guarantor can only recover insofar as the payment has been beneficial to the principal debtor.
Can a guarantee be given as security for future debts?
Yes, a guarantee may be given as security for future debts, the amount of which is not yet known. The creditor cannot claim against the guarantor until the amount of the debt has been ascertained.
What is the extent of the liability of the guarantor?
A guarantor’s liability cannot extend to more than what is stipulated. A guarantor may bind himself for less, but not for more than the principal debtor.
If the guarantor bound himself for more, his obligations shall be reduced to the limits of that of the debtor.
With regards to the form of the contract of guarantee, what is the rule?
A contract of guaranty is not a formal contract and is valid in whatever form it may be provided that it complies with the statute of frauds.
However, it must be express, and not presumed.
What are the qualifications of a guarantor?
A guarantor must:
(a) Possess integrity
(b) Has capacity to bind himself
(c) Has sufficient property to answer for the obligation
(d) Subject to the jurisdiction of the court of the place where his obligation is to be complied with
If a guarantor is convicted of a crime involving dishonesty or becomes insolvent, the creditor may demand another guarantor who has all the qualification. Except when the creditor has required and stipulated that a specified person should be the guarantor.
What is the right to excussion?
Generally, a guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor, and has resorted to all the legal remedies against the debtor.
Exception to this rule is that, an excussion cannot take place when:
(a) The guarantor expressly renounce such right
(b) The guarantor bound himself solidarily with the debtor
(c) In case of insolvency of the debtor
(d) The guarantor cannot be sued with the Philippines, unless he has left a manager or representative
(e) It is presumed that an execution on the property of the principal debtor would not result in the satisfaction of the obligation
When should the guarantor exercise his right to excussion?
The guarantor must set up the benefit of excussion against the creditor upon the latter’s demand for payment from him, and point out to the creditor the available property of the debtor within the Philippine territory which is sufficient to recover the debt.
What if the creditor did not take advantage of the properties pointed out by the guarantor?
The creditor who is negligent in exhausting the property pointed out by the guarantor shall suffer the loss, to the extent of said property, for the insolvency of the debtor resulting from such negligence.
What are the requisites if the creditor initiates an action against the principal debtor?
The guarantor must be given notice by the court, and the guarantor may appear, so that he may set up defenses granted to him by the law.
What is the rule with regards to the obligation of several guarantors of one debtor for the same debt?
In case of several guarantors of one debtor for the same debt, the obligation to answer for the debt is dividing among all. The creditor cannot claim from the guarantors except shares which they are respectively bound, except when solidarity has been expressly stipulated.
What is the obligation of the principal debtor when the guarantor pays the obligation with notice?
The guarantor who pays for a debtor must be indemnified by the latter. The indemnity comprises:
(a) The total amount of the debt
(b) The legal interests thereon from the time the payment was made known to the debtor
(c) The expenses incurred by the guarantor
(d) Damages, if they are due
The guarantor who pays is subrogated by virtue thereof to all the rights which the creditor had against the debtor.
What if the guarantor makes payment without notice to the debtor? What can the debtor do?
If the guarantor should pay without notifying the debtor, the latter may enforce against him all the defenses which he could have set up against the creditor at the time the payment has been made.
