Further, for the contract to be strictly construed it must be clearly

Credit Transactions identified that it is a contract of suretyship and not guarantee.

2nd Examination – Case Summary
Escano v Ortigas
The mere utilization of the term “SURETIES” could not make the
Undertaking a surety. Moreover, the concurrence of 2 or more
creditors or of 2 or more debtors the presumption is that the
obligation is only joint. Further, the absence of any express stipulation
that the petitioners agreed to bind themselves “jointly and severally”
in their obligations the Undertaking is presumed to be joint.
For an extension to discharge the surety it must be for a definite
period and made without the consent of the surety. The contract
must be one which precludes the creditor from or hinders him from
enforcing the principal contract within the period during which he
could have enforced it and which precludes the surety from paying
the debt.
Note: Contract of Adhesion is a contract or document prepared by one
party whereby the other merely affixes his signature signifying his
adherence to provisions therein.

In this case, the court distinguished between a surety and a solidary

co-debtor.

Asset Builders v Stronghold

A surety’s undertaking is contractual and accessory but direct,
primary and absolute. Nevertheless, the surety’s liability to the
creditor or promisee arises only upon the obligor’s default.

Castellvi v Sellner
Court distinguished a surety from a guarantor. Sellner’s responsibility
is that of a Guarantor not a surety. Hence, it is merely a secondary
obligation founded on an independent collateral agreement.

Machetti v Hospicio de San Jose

While the surety undertakes to pay if the principal does not pay the
guarantor only binds himself to pay if the principal cannot pay.

Even if the Court has declared the debtor as insolvent, you cannot go
directly to the guarantor until the assets of the debtor has been
liquidated and is found to be insufficient.

Note: Insolvency means that the debtor does not have sufficient assets
to pay off its obligations as they became due.

Gilat Satellite v UCPB

The surety cannot invoke in its favor the arbitration clause in the
Purchase agreement as it is not a party to the contract (it is a mere
stranger thereto) . Sureties do not insure the solvency of the debtor
but the debt itself.

3 Requisites to declare the debtor in default

1. the obligation is demandable and already liquidated
2. debtor delays performance
3. creditor requires the performance judicially or extrajudicially

Further, where the surety upon demand fails to pay it can be held
liable for interest even in so doing its obligation becomes more than
that of the principal obligation. The increased liability is not because
of the contract but because of the default and the necessity of judicial
collection.

A surety is directly and equally bound with the principal and is not
entitled to a separate notice of default or benefit of excussion. It can
be sued separately or together with the principal debtor.

Palmares v CA
A surety and guarantor was distinguished in this case. Where one
binds herself as “Jointly and severally liable as a comaker” his or her
liability is solidary.