Chp 13 - Surteyship Flashcards
(17 cards)
Surety (Guarantor)
A person who, in addition to the debtor, promises to fulfill an obligation. Common when dealing with minors or where secured transactions are unavailable.
Principal Debtor
The primary person who owes a debt or duty to a creditor.
Creditor
The party to whom a debt is owed.
Cosurety (Co-Guarantor)
Two or more sureties who are liable for the same debt of the principal debtor.
Absolute Guarantor
A surety who is liable to the creditor immediately upon the default of the principal debtor.
Conditional Guarantor of Collection
A surety liable only after the creditor exhausts legal remedies against the principal debtor.
Fidelity Bond
Protects an employer from losses due to a dishonest employee.
Performance Bond
Ensures that a contract is performed as agreed.
Official Bond
Guarantees a public official will faithfully perform duties.
Judicial Bond
Covers losses in a judicial proceeding.
Exoneration (Surety Right)
Surety can demand that the principal debtor pay the creditor when due or require cosureties to pay their shares.
Reimbursement (Surety Right)
Surety who pays the creditor has a right to recover payment from the principal debtor.
Subrogation (Surety Right)
Surety steps into the shoes of the creditor after paying the full debt, gaining all creditor’s rights.
Contribution (Surety Right)
Right of a cosurety who paid the full debt to require other cosureties to pay their proportionate shares.
Defenses Available to Principal Debtor Only
- Incapacity
Bankruptcy discharge
Setoff against creditor
Defenses Available to Surety Only
- Surety incapacity
Statute of Frauds noncompliance
Lack of assent/consideration
Fraud or duress by creditor
Setoff
Contract modification
Release of collateral or cosurety
Defenses Available to Both Debtor and Surety
- Forgery
Fraud or duress by creditor
Material alteration
Lack of assent/consideration
Illegality/impossibility
Full performance by debtor
