Legal Definition of Suretyship
An accessory agreement by which a person binds himself for another already bound, either in whole or in part, as for his debt, default or miscarriage.5 min read
An accessory agreement by which a person binds himself for another already bound, either in whole or in part, as for his debt, default or miscarriage.
Principle vs Surety
The person undertaken for must be liable as well as the person giving the promise, for otherwise the promise would be a principal and not a collateral agreement, and the promissor would be liable in the first instance; for example, a married woman would not be liable upon her contract, and the person who should become surety for her that she would perform it would be responsible as a principal and not as a surety. If a person undertakes as a surety when he knows the obligation or the principal is void, he becomes a principal.
As the contract of suretyship must relate to the same subject as the principal obligation, it follows that it must not be of greater extent or more onerous' either in its amount, or in the time or manner, or place of performance, than such principal obligation; and if it so exceed, it will be void, as to such excess. But the obligation of the surety may be less onerous, both in its amount, and in the time, place and manner of its performance, that of the principal debtor; it may be for a less amount, or the time may be more protracted.
Requirements of a Surety Contract
- The contract of suretyship may be entered into by all persons who are sui juris, and capable of entering into other contracts. See Parties to contracts.
- It must be made upon a sufficient consideration.
- The contract of suretyship or guaranty requires a present agreement between the contracting parties.
- Care must be taken to observe the distinction between an actual guaranty, and an offer to guaranty at a future time.
- When an offer is made, it must be accepted before it becomes binding.
- Where the statute of frauds is in force or its principles have been adopted, the contract of suretyship "to answer for the debt, default or miscarriage of another person," must be in writing, etc.
Discharge of a Contract of Suretyship
The contract of suretyship is discharged and becomes extinct:
- By the terms of the contract itself.
- By the acts to which both the creditor and principal alone are parties.
- By the acts of the creditor and sureties.
- By fraud.
- By operation of law.
By the Terms of the Contract
When by his contract the surety limits the period of time for which he is willing to be responsible, it is clear he cannot be held liable for a longer period; as when he engages that an officer who is elected annually shall faithfully perform his duty during his continuance in office; his obligation does not extend for the performance of his duty by the same officer who may be elected for a second year.
By Acts of the Creditor and Principal
The contract of suretyship becomes extinct or discharged by the acts of the principal and of the creditor without any act of the surety. This may be done:
- By payment, by the principal. When the principal makes payment, the sureties are immediately discharged, because the obligation no longer exists. But as payment is the act of two parties, the party tendering the debt and the party receiving it, the money or thing due must be accepted.
- By release of the principal. As the release of the principal discharges the obligation, the surety is also discharged by it.