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The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
A contract of suretyship is an agreement whereby a party, called the surety, guarantees the performance by another party of an obligation or undertaking in favor of another party.
Under a normal contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. However, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and resorted to all the legal remedies against the debtor.
WHAT IS A CONTRACT OF SURETY?
A contract of suretyship is an agreement whereby a party, called the surety, guarantees the performance by another party, called the principal or obligor, of an obligation or undertaking in favor of another party, called the obligee. Although the contract of a surety is secondary only to a valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no direct or personal interest over the obligations nor does it receive any benefit therefrom. (MARIANO LIM vs. SECURITY BANK CORPORATION, G.R. No. 188539, March 12, 2014)
WHAT IS A CONTRACT OF GUARANTY?
Under a normal contract of guarantee, the guarantor binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. The guarantor who pays for a debtor, in turn, must be indemnified by the latter. However, the guarantor cannot be compelled to pay the creditor unless the latter has exhausted all the property of the debtor and resorted to all the legal remedies against the debtor.
This is what is otherwise known as the benefit of excussion.Conversely, if this benefit of excussion is waived, the guarantor can be directly compelled by the creditor to pay the entire debt even without the exhaustion of the debtor’s properties. (TRADE AND INVESTMENT DEVELOPMENT CORPORATION OF THE PHILIPPINES vs. PHILIPPINE VETERANS BANK, G.R. No. 233850, July 1, 2019)
WHAT IS THE MAIN DIFFERENCE BETWEEN A CONTRACT OF SURETY AND GUARANTY?
In a contract of surety, the surety becomes automatically liable for the debt or duty once the debtor defaults in payment, except when otherwise stated in the contract.
On the other hand, in a contract of guaranty, the guarantor is not automatically liable. As a general rule, the guarantor becomes liable only when the creditor has already exhausted all the property of the debtor and resorted to all the legal remedies against the debtor, except when otherwise stated in the contract.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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