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21 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Types of surety
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1 - compensated - $ is the consideration
2 - gratuitous - uncompensated, not paid to make the promise to become liable on the debtor's obligation |
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Surety - cast of characters!
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debtor
creditor surety |
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types of gratuitous surety
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1. before or current to performance - perf or promise will service as consid for surety's promise
2. Noncurrent - gen no consid. EXCEPTIONS: 1) obtaining surety is a cond'n precedent (stated in a K), 2) add'l consid - if creditor gives add'l consid for surety's promise, surety will be bound |
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Surety - types of liability
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1. surety (strict surety) - accomodation maker, primary obligation. prom is collateral to someone else's promise to pay (17 yr old who wants car)
2. guarantor (of pymt), aka K of guarantee - cred must go to debtor before guarantor 3. guarantor of collectibility - cred must first SUE debtor before going to guarantor |
(3 kinds)
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S of F apply? How?
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Yes - typically reqs written evid of the promise to answer for the debt of another
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Surety S of F exceptions
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Exception:
1. Primary promise (where 3rd party makes primary promise to pay; no surety inolved; prom need not be in writing 2. Main purpose - if the main purpose of the surety's prom is his own pecuniary advantage, he will be bound even though there is not writing |
2
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constructive suretyship
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arises by operation of law. where a 3rd pty Ks with debtor to pay creditor and there is no NOVATION (form of substitutive K) the orig debtor becomes a surety by op of law
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gratuitous suretyship K will be construed...
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against the creditor
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compensated or commercial surety will be construed...
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strictly against the surety, if commercial surety has provided his own printed form (customary)
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surety who signs as principal is entitled to the rts of a surety...(to what extent?)
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only as against those persons who know he is signing as a surety
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rts of
surety v. creditor |
basically none.
- Notice - not entitled to notice of default from creditor - strict surety not entitled to have red first try to collect from debtor - BUT NOTE: IL law 740 ILCS 155/1 |
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IL 740 ILCS 155/1
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Surety has right to compel creditor to collect from the principal when
1. Prin is likely to become insolvent or leave the state w/out perf the K 2. a rt of action has accrued on the K 3. surety makes written request to the cred to enforce the C of A, and if the cred does not...the surety is fully discharged |
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rts of
surety v. debtor/principal |
arsenal of rts!!!
1. Exoneration - suit to compel pymt 2. Subrogation 3. Reimbursement |
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Subrogation
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- triggered by *total* satisfaction. surety can pay off all debt and then stand in the shoes of the creditor; surety is subrogated to the rts of the creditor
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reimbursement
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term for sureties (USE THIS, NOT indemnification, tho concept similar) after any payment
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surety rts:
surety v. co-sureties |
arises by K. One rt can be stronger than another!
1. Exoneration 2. Subrogation 3. Contribution |
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contribution
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(term for co-sureties, USE THIS) like indemnification, after any pymt can go after others for what A pd that was more than A's share
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How contribution calculated
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surety's share:
1. amt not specified - pro rata share by # of solvent sureties 2. amt specified - each cosurety remains liable for the orig amt stated in agmt - If one surety obtains security from the prin, she must share it - cosurety ent to cont from a cosurety even if the cosurety would hae had a defense against the creditor |
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Defenses of a surety
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1. Fraud, duress, nonperf by creditor (never on bar)
2. impossibility - if prin's perf is excused by this, so is surety's 3. Infancy, insanity, bankruptcy - surety can use as it's own defense, but can't use prin's inf/insan/bnkrpt as its defense 4. Discharge of prin's obligation |
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discharge of a principal's obligation
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1. Release
2. Covenant not to sue 3. Indemnified surety (surety w/ security for the amt of liab is not dischgd by a release of the prin b/c he will be fully indemnified from the security) 4. Failure to prevail in suit (both sued and action fails, surety's obl is dischgd) 5. payment |
5 ways - RCIFP
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Variation of risk - types, effect
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types:
1. alteration of K 2. ext of time 3. release of security 4. release of co-surety 5. impairment of collateral effect - 1. gratuitous - TOTAL dischg! 2. compensated - dischg the surety to extent the surety can show he suffered a loss b/c of the change (Art 3 UCC) |
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