Chapter 36: Other Security Devices. Suretyship vs. Guaranty. Suretyship and guaranty undertakings both promise to answer for the debt or default of another, but are not the same. A surety is equally liable for the debtor’s debt.
GuarantySuretyship and Guaranty
Surety and Absolute Guaranty are both liable to the creditor immediately
upon the debtor’s default.
A (non-absolute) Guaranty is liable only after the creditor has exhausted all options for collecting from the debtor.
2. Misrepresentation by Debtor
3. Changes in Loan Terms (e.g., extension of payment, compensated surety)
4. Release of principal Debtor
5. Bankruptcy of Principal Debtor
6. Insolvency of Principal Debtor
7. Death of Principal Debtor
8. Incapacity of Principal Debtor
9. Lack of Enforcement by Creditor
10. Creditor’s Failure to Give Notice of Default
11. Failure of Creditor to Resort to CollateralNo Release of Surety
2. Release, Surrender, or Destruction of Collateral (to extent of value of collateral)
3. Substitution of Debtor
4. Fraud/Misrepresentation by Creditor
5. Refusal by Creditor to Accept Payment from Debtor
6. Change in Loan Terms (uncompensated surety only)
7. Statute of Frauds
8. Statute of LimitationsRelease of Surety
2038 First Avenue
Camden, NJ 08101
October 7 , 19 98
For: John Hoskins
14 Smith Lane
_ _ _ , _ _
By order of: Jan Kent
Kent Products, Inc.
1503 Lee Blvd.
Camden, NJ 08101
Beneficiary;Drawer of DraftsUnder the Letter of Credit
Customer of Issuer
ABC Bank has established in your favor an irrevocable letter of credit up to an amount of
$400,000 (four hundred thousand dollars) available by your drafts on or before [date]
accompanied by a bill of lading showing shipment of [identify goods] by you to [name and address of buyer] by [identify carrier], an invoice covering such shipment, and an insurance policy providing [state coverage] of the goods for the benefit of [name of insured].
ABC Bank ManagerLetter of Credit