Suretyship in United States

Suretyship Definition

An undertaking to answer for the debt, default, or miscarriage of another by which the surety becomes bound as Hhe principal or original debtor is bound. It differs from guaranty in this, that suretyship is a primary obligation to see that the debt is paid, while guaranty is a collateral undertaking, essentially in the alternative, to pay the debt if the debtor does not pay it. 24 Pick. (Mass.) 252. And, accordingly, a surety may be sued as a promisor to pay the debt, while a guarantor must be sued specially on his contract. 8 Pick. (Mass.) 423. While guaranty applies only to contracts not under seal, and principally to mercantile obligations, suretyship may apply to all obligations under seal or by parol. The subjects are, however, nearly related, and many of the principles are common to both. There must be a principal debtor liable, otherwise the promise becomes an original contract; and, the promise being collateral, the surety must be bound to no greater extent than the principal. Suretyship is one of the contracts included in the statute of frauds (29 Car. II. c. 3.) Kent, C. J., divides secondary undertakings into three classes: (1) Cases in which the guaranty or promise is collateral to the principal contract, but is made at the same time, and becomes an essential ground of the credit given to the principal or direct debtor. Here there is not, and need not be, any other consideration than that moving between the creditor and original debtor. (2) Cases in which the collateral undertaking is subsequent to the creation of the debt, and was not the inducement to it, though the subsisting liability is the ground of the promise, without any distinct and unconnected inducement. Here there must be some further consideration shown, having an immediate respect to such liability; for the consideration for the original debt will not attach to this subsequent promise. (3) When the promise to pay the debt of another arises out of some new and original consideration of benefit or harm moving between the newly-contracting parties. 8 Johns. (N. Y.) 29; 21 Y. 415; 21 Me. 459; 15 Pick. (Mass.) 159. A simpler division is into two classes:
(1) Where the principal obligation exists before the collateral undertaking is made.
(2) Where there is no principal obligation prior in time to the collateral undertaking. In the last class, the principal obligation may be contemporaneous with or after the collateral undertaking. The first class includes Kent’s second and third, the second includes Kent’s first, to which must be added cases where the guaranty referring to a present or future principal obligation does not share the consideration thereof, but proceeds on a distinct consideration. Moreover, there are other original undertakings out of the statute of frauds, and valid, though by parol, besides his third class. These are where the credit is given exclusively to the promissor, though the goods or consideration pass to another. Under this division, undertakings of the first class are original, (1) when the principal obligation is thereby abrogated; (2) when, without such abrogation, the promisor, for his own advantage, apparent on the bargain, undertakes for some new consideration moving to him from the promisee; (3) where the promise is in consideration of some loss or disadvantage to the promisee; (4) where the promise is made to the principal debtor on a consideration moving from the debtor to the promissor. Theobald, Sur. 37 et seq., 49 et seq.

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Legal Issue for Attorneys

An undertaking to answer for the debt, default, or miscarriage of another by which the surety becomes bound as Hhe principal or original debtor is bound. It differs from guaranty in this, that suretyship is a primary obligation to see that the debt is paid, while guaranty is a collateral undertaking, essentially in the alternative, to pay the debt if the debtor does not pay it. 24 Pick. (Mass.) 252. And, accordingly, a surety may be sued as a promisor to pay the debt, while a guarantor must be sued specially on his contract. 8 Pick. (Mass.) 423. Wh
ile guaranty applies only to contracts not under seal, and principally to mercantile obligations, suretyship may apply to all obligations under seal or by parol. The subjects are, however, nearly related, and many of the principles are common to both. There must be a principal debtor liable, otherwise the promise becomes an original contract; and, the promise being collateral, the surety must be bound to no greater extent than the principal. Suretyship is one of the contracts included in the statute of frauds (29 Car. II. c. 3.) Kent, C. J., divides secondary undertakings into three classes: (1) Cases in which the guaranty or promise is collateral to the principal contract, but is made at the same time, and becomes an essential ground of the credit given to the principal or direct debtor. Here there is not, and need not be, any other consideration than that moving between the creditor and original debtor. (2) Cases in which the collateral undertaking is subsequent to the creation of the debt, and was not the inducement to it, though the subsisting liability is the ground of the promise, without any distinct and unconnected inducement. Here there must be some further consideration shown, having an immediate respect to such liability; for the consideration for the original debt will not attach to this subsequent promise. (3) When the promise to pay the debt of another arises out of some new and original consideration of benefit or harm moving between the newly-contracting parties. 8 Johns. (N. Y.) 29; 21 Y. 415; 21 Me. 459; 15 Pick. (Mass.) 159. A simpler division is into two classes:
(1) Where the principal obligation exists before the collateral undertaking is made.
(2) Where there is no principal obligation prior in time to the collateral undertaking. In the last class, the principal obligation may be contemporaneous with or after the collateral undertaking. The first class includes Kent’s second and third, the second includes Kent’s first, to which must be added cases where the guaranty referring to a present or future principal obligation does not share the consideration thereof, but proceeds on a distinct consideration. Moreover, there are other original undertakings out of the statute of frauds, and valid, though by parol, besides his third class. These are where the credit is given exclusively to the promissor, though the goods or consideration pass to another. Under this division, undertakings of the first class are original, (1) when the principal obligation is thereby abrogated; (2) when, without such abrogation, the promisor, for his own advantage, apparent on the bargain, undertakes for some new consideration moving to him from the promisee; (3) where the promise is in consideration of some loss or disadvantage to the promisee; (4) where the promise is made to the principal debtor on a consideration moving from the debtor to the promissor. Theobald, Sur. 37 et seq., 49 et seq.

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This definition of Suretyship is based on The Cyclopedic Law Dictionary. This entry needs to be proofread.

Practical Information

Note: Some of this information was last updated in 1982

See guaranty (in U.S. law).

(Revised by Ann De Vries)

What is Suretyship?

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