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GUARANTY AND SURETYSHIP performance, and as between the two who are bound, the one rather than

performance, and as between the two who are bound, the one rather than the other should perform
(ARTICLES 2047 TO 2084) > Contractual relation resulting from an agreement whereby one person, the surety, engages to be
answerable for a debt, default, miscarriage of another known as the principal
NATURE AND EXTENT OF GUARANTY
LAW APPLICABLE TO SURETYSHIP
Article 2047. By guaranty, a person, called the guarantor, binds himself to the creditor to fulfill the > Second paragraph
obligation of the principal debtor in case the latter should fail to do so. > It covers OBLIGATIONS, DIFFERENT KINDS OF OBLIGATIONS, JOINT AND SOLIDARY
OBLIGATIONS, OBLIGATIONS AND CONTRACTS
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, > If a person binds himself solidarily with the principal debtor, the contract is called suretyship and the
Title I of this Book shall be observed. In such case, the contract is called a suretyship. guarantor is called the SURETY

GUARANTY What is the distinction between Guaranty and Suretyship?


> Contract between the guarantor and creditor
1. Guaranty is collateral while Surety is an original promissory undertaking.
> In a broad sense, it includes pledge and mortgage because the purpose of guaranty may be accomplished 2. In guaranty, the guarantor is primarily liable while in suretyship, the surety is secondarily available.
not only by securing the fulfillment of an obligation contracted by the principal debtor through the 3. The guarantor binds himself to pay if the principal cannot pay. The surety undertakes to pay if the
personal guaranty of a third person but also by furnishing to the creditor for his principal does not pay.
security, property with authority to collect the debt from the proceeds of the same in case of default. 4. The guarantor is the insurer of the solvency of the debtor. The surety is the insurer of the debt.
5. The guarantor can avail of the benefit of excussion and division in case the creditor proceeds against him.
CHARACTERISTICS OF A GUARANTY The surety cannot avail of the benefit of excussion and division.
1. Accessory—because it is dependent for its existence upon the principal obligation guaranteed by it
2. Subsidiary and conditional—it takes effect only when the principal debtor fails in his obligation The following instances will extinguish a contract of guaranty:
subject to limitation
3. Unilateral— 1.) Release in favor of one of the guarantors, without the others' consent, will benefit all to the extent of the
a. Gives rise only to the duty on the part of the guarantor in relation to the creditor and not vice share of the guarantor who was released from his liability.
versa
b. It may be entered into even without the intervention of the principal debtor 2.) If the creditor voluntarily accepts immovable or other property in payment of the debt, even if he loses
4. Contract, which requires that the guarantor be a distinct person from the principal debtor because a them later through eviction or conveyance of property.
person cannot be the personal guarantor of himself
3.) Effect of eviction: revival or the principal property but not the guaranty
CLASSIFICATION OF GUARANTY
1. Guaranty in the broad sense— 4.) If by an act of the creditor the guarantors, though solidarily liable, can't be subrogated to the creditor's
a. Personal—guaranty properly so-called or guaranty in the strict sense. The guarantee given is the rights, mortgages and preferences.
credit given by the person who guarantees the fulfillment of the principal obligation.
b. Real—the guaranty is property, movable or immovable 5.) For the same causes as all obligations under Art. 1231 of the Civil Code (extinguishment of obligations:
2. As to its origin payment/performance, loss, condonation/remission, confusion/merger of rights, compensation, novation,
a. Conventional annulment, recission, prescription and fulfillment of a resolutory condition.)
b. Legal
c. Judicial 6.) When the principal obligation is extinguished.
3. As to consideration
a. Gratuitous 7.) Extension granted by the creditor to the debtor without the guarantor's consent.
b. Onerous
4. As to persons guaranteed RIGHT OF GUARANTOR TO BENEFIT OF EXCUSSION OR EXHAUSTION
a. Single 1. Guarantor is only secondarily liable
b. Double or sub-guaranty—one constituted to secure the fulfillment of a guarantee in another guaranty 2. All legal remedies against debtor to be first exhausted
5. As to its scope and extent
a. Definite—one where the guaranty is limited to the principal obligation only, or to a specific portion RIGHT OF CREDITOR TO SECURE JUDGMENT AGAINST GUARANTOR PRIOR TO EXHAUSTION
thereof > As a rule, an ordinary personal guarantor may demand exclusion of all the property of debtor
b. Indefinite or simple—one where the guaranty before he can be compelled to pay
includes not only the principal obligation but also > The creditor however may secure prior thereto a judgment against the guarantor, who shall be entitled
all its accessories to a deferment of the execution of said judgment against him until after the properties of the principal
debtor shall have been first exhausted to satisfy the latter’s obligation
SURETYSHIP
> A relation which exists where one person has undertaken an obligation and another person is also
under a direct and primary obligation or other duty to a third person, who is entitled to but one