Suretyship Flashcards
What is the difference between a surety and a guarantor?
surety - directly liable on the the contract
guarantor - liable to the creditor only if the debtor does not perform their duty to the creditor and the creditor has exhausted all legal remedies
T/F: the Statute of Frauds requires written evidence of the promise to answer for the debt of another signed by the surety
True; if it is not in writing it is not enforceable
If the surety satisfies the creditor, the surety can then try to collect payment from the principal debtor in what 3 ways?
exoneration (suit to compel payment)
subrogation (enforcement of creditor’s right against principal)
reimbursement (suit against principal after payment)
What are cosureties?
two or more sureties of the same obligation; they are jointly and severally liable; any one or more may be liable for the entire obligation
a surety is entitled to contribution from the cosureties for their share of the payment
What are some defenses available to a surety?
defrauded principal (creditor must have been aware of the fraud)
duress upon principal (surety did not know of duress for principal to obtain a surety)
illegality of the principal’s obligation
discharge of principal’s obligation
surety’s incapacity or bankruptcy
lack of consideration (it must be supported by consideration to be enforceable; an unpaid surety will be bound if they make the promise to act as surety before consideration flows from the creditor to the principal debtor)
variations of the surety’s risk (any variation of the contract that changes an unpaid surety’s risk will discharge the surety; any variation that changes a paid surety’s risk will discharge the surety only if the change is material and increases their risk of loss)
extension of time vs delay in collection (same as variations of the surety’s risk if the time is extended to collect; but if the creditor just delays in collection, the surety is not discharged)
loss of security
release of cosurety (if a cosurety is relaeased by the creditor without the consent of the other cosureties results in the remaining cosurety losing the right of contribution against the released cosurety; therefore, the remaining cosurety would only pay their percentage of the debt owed)
T/F: federal law provides that Social Security payments are not subject to garnishment, execution, levy, or attachment
True; there is also a limit on the amount of an employee’s wages that may be garnished in order to prevent the debtor from becoming destitute
What is a mechanic/artisan lien?
a mechanic or artisan who works on property and either improves it or repairs it automatically has a lien on the property, for the price of repairs, for as long as the property is in the lienor’s possession
these liens are possessory and dissolve as soon as the lienor lets the owner have the property back; if the mechanic or artisan goes unpaid, they will give the owner notice of the intention to sell the retained property to pay the owner’s bill
What is a fraudulent conveyance?
it occurs when a debtor transfers property with the intent to hinder, delay, or defraud any of their creditors; it is void or voidable and will be set aside in a proper proceeding
T/F: the Federal Fair Debt Collection Practices Act (FDCPA) curbs abuses by collection agencies in collecting consumer debts
True; however, the act does not apply to a creditor attempting to collect its own debts, just to services that collect consumer debts for others
T/F: a collection agency can contact third persons to discover a debtor’s whereabouts
True; but they can’t disclose that they are a collection agency or that the debtor owes a debt
T/F: a debtor has the power to terminate the collection agency’s contacts by notifying them in writing that they will not pay the debt and to stop further communication
True; the only other communication will be to inform the debtor that it is bringing a lawsuit or seeking other remedies
T/F: the FDCPA gives debtors the right to sue for actual damages caused by the collection agency’s misconduct
True; the FDCPA also provides a statutory $1,000 damage award
