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Flashcards in Suretyship: Rights of the Parties Deck (4)
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1

Suretyship
Rights of Creditor

Choices:
- Proceed against debtor/ debtor's property
- Proceed against surety
- Proceed against collateral (sell, but turnover extra)

2

Suretyship
Rights of Surety/Guarantor

- Exoneration: exhaust recovery against debtor before moving on to surety
- Reimbursement: seek reimbursement from debtor
- Subrogation:
- creditor's rights against debtor
- creditor's rights to collateral
- credtior's rights against 3rd parties
- creditor's rights against cosurety
- Contribution by cosurety:
- GR: jointly and severally liable
- if creditor releases cosurety without other cosureties consent, they are not liable for that portion
- Reimbursement: if fully reimbursed, not right to contribution
- Collateral: share in proportion to liability the collateral

3

Suretyship
Events that DO NOT Release Surety from Liablity

- Insolvency of debtor
- Bankruptcy of debtor
- Fraud or misrepresentation by debtor
- Principal debtor's incapacity
- Death of debtor
- Release of debtor w/o consent doesn't release surety
- Changes or modification (if compensated surety)
- Creditor's failure to notify of debtors default
- Failure of creditor to first resort to collateral

4

Suretyship
Defenses
Events that DO Release Surety from Liablity

- Principal debt is paid
- Surety's incapacity
- Guarantor's discharge in bankruptcy
- Statute of limitations expires
- Fraud or misrepresentation of creditor
- Release
- Refusal of principal debtor's tender
- Material alteration by creditor
- Creditor's failure to disclose
- Changes/modifications with Uncompensated surety (material and binding modification = release)
- Surrender or impairment of debtor's collateral
- Special release for guarantee of collections
- failure of creditor to give debtor proper notice
- Statute of frauds: Always in writing

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