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Understanding Surety vs. Guarantor

1. A surety is primarily liable for the payment of another's debt or obligation, unlike a guarantor who is only liable if the debtor defaults. 2. While sureties and guarantors are both bound for another, sureties are usually bound by the same instrument as the principal and know of any defaults, whereas guarantors enter a separate agreement that may be before or after the principal. 3. In a broad sense, surety includes anyone liable for another's debt either primarily or secondarily, but in a narrow sense refers specifically to primary liability for another's debt, distinguishing it from a guarantor's secondary liability.

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337 views1 page

Understanding Surety vs. Guarantor

1. A surety is primarily liable for the payment of another's debt or obligation, unlike a guarantor who is only liable if the debtor defaults. 2. While sureties and guarantors are both bound for another, sureties are usually bound by the same instrument as the principal and know of any defaults, whereas guarantors enter a separate agreement that may be before or after the principal. 3. In a broad sense, surety includes anyone liable for another's debt either primarily or secondarily, but in a narrow sense refers specifically to primary liability for another's debt, distinguishing it from a guarantor's secondary liability.

Uploaded by

Jason Henry
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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surety, n. 1. A person who is primarily liable for the payment of anothers debt or the performance of anothers obligation.

Although a surety is similar to an insurer, one important difference is that a surety often receives no compensation for assuming liability. A surety differs from a guarantor, who is liable to the creditor only if the debtor does not meet the duties owed to the creditor; the surety is directly liable. 2. A formal assurance; esp., a pledge, bond, guarantee, or security given for the fulfillment of an undertaking. The words surety and guarantor are often used indiscriminately as synonymous terms; but while a surety and a guarantor have this in common, that they are both bound for another person, yet there are points of difference between them which should be carefully noted. A surety is usually bound with his principal by the same instrument, executed at the same time and on the same consideration. He is an original promisor and debtor from the beginning, and is held ordinarily to know every default of this principal. Usually the surety will not be discharged, either by the mere indulgence of the creditor to the principal, or by want of notice of the default of the principal, no matter how much he may be injured thereby. On the other hand, the contract of the guarantor is his own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal, and is often founded on a separate consideration from that supporting the contract of the principal. A surety, in the broad sense, is one who is liable for the debt or obligation of another, whether primarily or secondarily, conditionally or unconditionally. In other words, the term surety includes anyone who is bound on an obligation which, as between himself and another person who is bound to the obligee for the same performance, the latter obligor should discharge. In this sense, suretyship includes all accessorial obligations. By such terminology, guarantors and indorsers are kinds of sureties . A surety, in the narrow sense, is one who is liable in form primarily on the debt or obligation of another. His obligation is accessorial to that of the principal debtor, but it is direct and not conditioned on the principal debtors default. In this sense, suretyship differs from guaranty and indorsement, which are conditional, secondary obligations . The word surety is in the majority of American decisions used in the narrower sense to indicate a primary obligation to pay anothers debt, to distinguish it from the secondary obligation of a guarantor. This terminology has the advantage of indicating by the use of the one word surety an obligation which is at once one to pay anothers debt, but which at the same time is not conditioned upon anothers default.

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