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Flashcards in Suretyship Deck (7):

In a suretyship, if the debtor defaults what can the creditor do against surety?

Requires creditor sue debtor first
VA Statute: Surety makes a written demand to creditor to collect from debtor first.


Can a surety raise a lack of consideration to suretyship as a defense if principal defaults to obligee?

No - if surety was provided at time obligee extended credit to principal (sufficient consideration)
Yes - if surety was made after the sale


Must an suretyship be in writing?

Generally yes, unless primary reason for obligation is to benefit the surety.


Can surety raise a defense that principal had against obligee?

Yes - for fraud, duress, breach of contract (transactional)
No - for infancy/insanity, bankruptcy, or statute of limitations (personal)


Can a surety raise a statute of limitation defense that principal had against obligee?

No - personal defense that surety cannot raise.


J lends car to D and G guarantees the loan. J takes a security interest in the car he sold to D, but fails to perfect. When D defaults and J sues G, can G raise a defense on the failure to perfect?

Yes - release or other loss of security


In a suretyship, when the debtor defaults, what can the surety do against the debtor?

1) surety can bring a suit in equity to compel debtor to pay (right of exoneration)
2) right of reimbursement if surety paid creditor
3) right of subrogation - full payment to creditor and steps into shoes of creditor against debtor.