Introduction Flashcards
When does suretyship arise?
When one person agrees to be liable for the debt or obligation of another.
What are the parities involved?
The creditor to whom the obligation is owed; the debtor who owes the debt/obligation; and the surety.
What is a surety?
A person who promises along with obligor to pay the debtor’s obligation when it becomes due. A surety is DIRECTLY liable on the obligation.
What is a guarantor?
A person who promises to pay the obligation of a debtor ONLY if the debtor defaults. A creditor MUST seek payment from the principal before approaching the guarantor.
What is a guarantor of collectibility?
A person who promises to pay the obligation of the debtor ONLY if the credit is unable to collect from the debtor after exhausting all legal remedies.
What is a gratuitous (or uncompensated) surety?
When is this surety discharged form his obligation?
A surety who is not paid to make the promise to become liable on the debtor’s obligation.
If the creditor does anything that varies the risk that the surety agreed to assume.
This surety is favored by the law.
What is a compensated surety?
When is this surety discharged form his obligation?
A surety who is paid to make the promise to become liable on the debtor’s obligation?
Only if the creditor varies his risk and the variation results in injury to the compensated surety.
Some courts have held that compensated sureties can only be discharged to the extent of injury.
