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Suretyship (state)

Suretyship (State)

by Chungfuwah, Dec. 2005

Subjects: state suretyship

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47 Cards in this Set

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	When does a SURETYSHIP arise? When one person agrees to be ________ for the ______ or _____________ of another.	When does a SURETYSHIP arise? When one person agrees to be LIABLE for the DEBT or OBLIGATION of another.
	SURETYSHIP - 3 PARTIES INVOLVED (1) ________ (person to whom obligation is owed) (2) ________ (person who owes the debt or obligation) (3) ________	SURETYSHIP - 3 PARTIES INVOLVED (1) CREDITOR (person to whom obligation is owed) (2) DEBTOR (person who owes the debt or obligation) (3) SURETY
	SURETY: A person who promises (along w/ the _______) to pay the debtor's obligation when it becomes ______.	SURETY: A person who promises (along w/ the DEBTOR) to pay the debtor's OBLIGATION when it becomes DUE.
	GUARANTOR: A person who promises to pay the obligation of the debtor ONLY IF the ________ _________.	GUARANTOR: A person who promises to pay the obligation of the debtor ONLY IF the DEBTOR DEFAULTS.
	GUARANTOR OF COLLECTIBILITY: A person who promises to pay the obligation of the debtor ONLY IF the _________ is UNABLE to _________ from the debtor after exhausting ALL _________ REMEDIES.	GUARANTOR OF COLLECTIBILITY: A person who promises to pay the obligation of the debtor ONLY IF the CREDITOR is UNABLE to COLLECT from the debtor after exhausting ALL LEGAL REMEDIES.
	What is this? A person who promises along w/ the debtor to pay the debtor's obligation when it becomes due.	SURETY This is a person who promises along w/ the debtor to pay the debtor's obligation when it becomes due.
	What is this? A person who promises to pay the obligation of the debtor ONLY IF THE DEBTOR DEFAULTS.	GUARANTOR This is a person who promises to pay the obligation of the debtor ONLY IF THE DEBTOR DEFAULTS.
	What is this? A person who promises to pay the obligation of the debtor ONLY IF the creditor is unable to collect from the debtor after exhausting ALL LEGAL REMEDIES.	GUARANTOR OF COLLECTIBILITY This is a person who promises to pay the obligation of the debtor ONLY IF the creditor is unable to collect from the debtor after exhausting ALL LEGAL REMEDIES.
	GRATUITOUS VS. COMPENSATED SURETIES ___________ SURETY: A surety who is NOT paid to make the promise to become liable on the debtor's obligation.	GRATUITOUS VS. COMPENSATED SURETIES GRATUITOUS SURETY: A surety who is NOT paid to make the promise to become liable on the debtor's obligation.
	GRATUITOUS VS. COMPENSATED SURETIES ___________ SURETY: A surety who is paid to make the promise to become liable on the debtor's obligation.	GRATUITOUS VS. COMPENSATED SURETIES COMPENSATED SURETY: A surety who is paid to make the promise to become liable on the debtor's obligation.
	GRATUITOUS SURETY A gratuitous surety is __________ from his undertaking if the ________ does anything that varies the _______ that the surety agreed to assume.	GRATUITOUS SURETY A gratuitous surety is DISCHARGED from his undertaking if the CREDITOR does anything that varies the RISK that the surety agreed to assume.
	COMPENSATED SURETY A compensated surety is discharged ONLY IF the ________ varies his _______ and it results in _______ to the ____________ SURETY. Some courts hold that a compensated surety can ONLY be discharged to the _________ OF HIS INJURY.	COMPENSATED SURETY A compensated surety is discharged ONLY IF the CREDITOR varies his RISK and it results in INJURY to the COMPENSATED SURETY. Some courts hold that a compensated surety can ONLY be discharged to the EXTENT OF HIS INJURY.
	SURETYSHIP is merely a specific type of ___ that has a few special rules.	SURETYSHIP is merely a specific type of K that has a few special rules.
	Most ________ LAW K principles apply to suretyship.	Most COMMON LAW K principles apply to suretyship.
	CONSIDERATION REQUIRED A surety's ________ is NOT enforceable UNLESS it is supported by ___________.	CONSIDERATION REQUIRED A surety's PROMISE is NOT enforceable UNLESS it is supported by CONSIDERATION.
	CONSIDERATION In a compensated surety situation, the ____________ will serve as consideration given in exchange for the surety's ________. HOWEVER, in a ____________ surety situation, the only consideration given for the surety's promise is the __________ promise or performance to the _________.	CONSIDERATION In a compensated surety situation, the COMPENSATION will serve as consideration given in exchange for the surety's PROMISE. HOWEVER, in a GRATUITOUS surety situation, the only consideration given for the surety's promise is the CREDITOR'S promise or performance to the DEBTOR.
	CONSIDERATION In a gratuitous surety situation, the ONLY consideration given for the surety's promise is the ___________ promise or performance to the ________. The gratuitous surety's promise generally must be given ______ or AT THE _____ TIME the creditor performs or promises to perform in order to serve as consideration. If the surety does NOT make her promise until _______ the creditor has performed or made an absolute promise to perform, there is _____ consideration to support the surety's promise b/c of the ____________ DUTY RULE.	CONSIDERATION In a gratuitous surety situation, the ONLY consideration given for the surety's promise is the CREDITOR'S promise or performance to the DEBTOR. The gratuitous surety's promise generally must be given BEFORE or AT THE SAME TIME the creditor performs or promises to perform in order to serve as consideration. If the surety does NOT make her promise until AFTER the creditor has performed or made an absolute promise to perform, there is NO consideration to support the surety's promise b/c of the PREEXISTING DUTY RULE
	STATUTE OF FRAUDS USUALLY APPLIES A suretyship undertaking that is NOT evidenced by a _________ signed by the _______ generally will _____ be enforceable. NOTE: There are some ______________ to the SOF requirement!	STATUTE OF FRAUDS USUALLY APPLIES A suretyship undertaking that is NOT evidenced by a WRITING signed by the SURETY generally will NOT be enforceable. NOTE: There are some EXCEPTIONS to the SOF requirement!
	STATUTE OF FRAUDS - EXCEPTIONS There are several exceptions to the SOF requirement. EXCEPTION: A promise that is NOT ___________ to another person's promise to pay (ie. a third party's PRIMARY PROMISE to pay) is NOT a "suretyship" bound by the SOF. EXCEPTION: If the _____ PURPOSE of the surety's promise is his own __________ advantage, the promise is NOT w/i the SOF.	STATUTE OF FRAUDS - EXCEPTIONS There are several exceptions to the SOF requirement. EXCEPTION: A promise that is NOT COLLATERAL to another person's promise to pay (ie. a third party's PRIMARY PROMISE to pay) is NOT a "suretyship" bound by the SOF. EXCEPTION: If the MAIN PURPOSE of the surety's promise is his own PECUNIARY advantage, the promise is NOT w/i the SOF.
	CONSTRUCTION OF SURETYSHIP K'S - GRATUITOUS SURETY The PROMISE of a gratuitous surety will be _________ CONSTRUED against the _________.	CONSTRUCTION OF SURETYSHIP K'S - GRATUITOUS SURETY The PROMISE of a gratuitous surety will be STRICTLY CONSTRUED against the CREDITOR.
	CONSTRUCTION OF SURETYSHIP K'S - COMPENSATED OR COMMERCIAL SURETY K's of a commercial surety are interpreted like ____ OTHER K. If a commercial surety has provided his own PRINTED ______, ambiguous _________ will be STRICTLY CONSTRUED against the ________.	CONSTRUCTION OF SURETYSHIP K'S - COMPENSATED OR COMMERCIAL SURETY K's of a commercial surety are interpreted like ANY OTHER K. If a commercial surety has provided his own PRINTED FORM, ambiguous LANGUAGE will be STRICTLY CONSTRUED against the SURETY.
	CONSTRUCTION OF SURETYSHIP K'S - CIRCUMSTANCES RELEVANT IN INTERPRETATION The ________ of the K between the __________ and OBLIGEE may be used in ___________ the surety's K.	CONSTRUCTION OF SURETYSHIP K'S - CIRCUMSTANCES RELEVANT IN INTERPRETATION The TERMS of the K between the PROMISOR and OBLIGEE may be used in CONSTRUING the surety's K.
	CONSTRUCTION OF SURETYSHIP K'S - SURETY WHO SIGNS AS PRINCIPAL A surety who signs a writing as an apparent principal is _________ to the rights of a surety ONLY as _________ those persons who _______ she is signing as a surety.	CONSTRUCTION OF SURETYSHIP K'S - SURETY WHO SIGNS AS PRINCIPAL A surety who signs a writing as an apparent principal is ENTITLED to the rights of a surety ONLY as AGAINST those persons who KNOW she is signing as a surety.
	SURETY'S RIGHTS AGAINST THE PRINCIPAL---> o ___________ OR REIMBURSEMENT o EXONERATION and RULE OF ______ v. PACKARD o ____________	SURETY'S RIGHTS AGAINST THE PRINCIPAL---> o INDEMNITY OR REIMBURSEMENT o EXONERATION and RULE OF PAIN v. PACKARD o SUBROGATION
	SURETY'S RIGHTS AGAINST PRINCIPAL - INDEMNITY/REIMBURSEMENT After full or partial payment by a surety, he has an _________ RIGHT to be reimbursed by the ________. Upon payment, the STATUTE OF _____________ on the surety's right to reimbursement ________ to run. NOTE: The giving of another nonnegotiable note is ____ payment.	SURETY'S RIGHTS AGAINST PRINCIPAL - INDEMNITY/REIMBURSEMENT After full or partial payment by a surety, he has an ABSOLUTE RIGHT to be reimbursed by the PRINCIPAL. Upon payment, the STATUTE OF LIMITATIONS on the surety's right to reimbursement BEGINS to run. NOTE: The giving of another nonnegotiable note is NOT payment.
	SURETY'S RIGHTS AGAINST PRINCIPAL - EXONERATION AND RULE OF PAIN v. PACKARD A surety may bring a suit IN ________ to compel the _________ to perform an obligation when it FALLS ______ (ie. sue for exoneration). By ________, a surety, by WRITTEN ________, may require the __________ to sue first, and if he refuses or fails to act w/i _____ days of the notice, the surety is __________.	SURETY'S RIGHTS AGAINST PRINCIPAL - EXONERATION AND RULE OF PAIN v. PACKARD A surety may bring a suit IN EQUITY to compel the PRINCIPAL to perform an obligation when it FALLS DUE (ie. sue for exoneration). By STATUTE, a surety, by WRITTEN NOTICE, may require the CREDITOR to sue first, and if he refuses or fails to act w/i 30 days of the notice, the surety is DISCHARGED.
	SURETY'S RIGHTS AGAINST PRINCIPAL - SUBROGATION Once the surety has fully paid the creditor, the surety may ________ any rights the creditor had against the _________.	SURETY'S RIGHTS AGAINST PRINCIPAL - SUBROGATION Once the surety has fully paid the creditor, the surety may ENFORCE any rights the creditor had against the PRINCIPAL.
	SUBROGATION: When a ________ PERSON pays a _________ for the debt of another and then __________ to his rights against the __________.	SUBROGATION: When a THIRD PERSON pays a CREDITOR for the debt of another and then SUCCEEDS to his rights against the DEBTOR.
	What is this? When a third person pays a creditor for the debt of another and then succeeds to his rights against the debtor.	SUBROGATION - When a third person pays a creditor for the debt of another and then succeeds to his rights against the debtor.
	SURETY'S RIGHTS AGAINST OTHER ________---> (1) EXONERATION (2) CONTRIBUTION	SURETY'S RIGHTS AGAINST OTHER SURETIES---> (1) EXONERATION (2) CONTRIBUTION
	CONTRIBUTION: A surety who pays the principal's debt is entitled to a PRO _______ SHARE from co-sureties who are liable on the same obligation and who are _________ and w/i the jurisdiction of the _______ COURT. NOTE: The fact that the _________ OF LIMITATIONS has run on a creditor's claims against the _________ and OTHER CO-SURETIES does NOT affect the right of _________. NOTE: If one surety receives _________ from the principal, he must share it w/ other __________.	CONTRIBUTION: A surety who pays the principal's debt is entitled to a PRO RATA SHARE from co-sureties who are liable on the same obligation and who are SOLVENT and w/i the jurisdiction of the EQUITY COURT. NOTE: The fact that the STATUTE OF LIMITATIONS has run on a creditor's claims against the PRINCIPAL and OTHER CO-SURETIES does NOT affect the right of CONTRIBUTION. NOTE: If one surety receives SECURITY from the principal, he must share it w/ other CO-SURETIES.
	SURETY'S RIGHTS AGAINST OTHER SURETIES If one surety receives _________ from the principal, he MUST _______ it w/ other co-sureties.	SURETY'S RIGHTS AGAINST OTHER SURETIES If one surety receives SECURITY from the principal, he MUST SHARE it w/ other co-sureties.
	SURETY'S RIGHTS AGAINST THE CREDITOR---> o APPLICATION BY __________ OF PAYMENTS BY PRINCIPAL DEBTOR o SUBROGATION	SURETY'S RIGHTS AGAINST THE CREDITOR---> o APPLICATION BY CREDITOR OF PAYMENTS BY PRINCIPAL DEBTOR o SUBROGATION
	SURETY'S RIGHTS AGAINST THE CREDITOR - APPLICATION BY CREDITOR OF PAYMENTS BY PRINCIPAL DEBTOR If a principal owes several debts to a creditor, the creditor need _____ relieve the surety UNLESS the ________ so directs. W/o such direction, the creditor can apply _________ to discharge ______ DEBT owed by the principal.	SURETY'S RIGHTS AGAINST THE CREDITOR - APPLICATION BY CREDITOR OF PAYMENTS BY PRINCIPAL DEBTOR If a principal owes several debts to a creditor, the creditor need NOT relieve the surety UNLESS the PRINCIPAL so directs. W/o such direction, the creditor can apply PAYMENT to discharge ANY DEBT owed by the principal.
	SURETY'S RIGHTS AGAINST THE CREDITOR - SUBROGATION After _____ payment by the surety, the surety is entitled to step into the shoes of the __________ and can use all the _________ the creditor could use against the principal.	SURETY'S RIGHTS AGAINST THE CREDITOR - SUBROGATION After FULL payment by the surety, the surety is entitled to step into the shoes of the CREDITOR and can use all the REMEDIES the creditor could use against the principal.
	DEFENSES OF SURETY AGAINST THE CREDITOR o PERSONAL AND ________ DEFENSES o FRAUD OR _________ o VARIATIONS OF SURETY'S ________	DEFENSES OF SURETY AGAINST THE CREDITOR o PERSONAL AND REAL DEFENSES o FRAUD OR DURESS o VARIATIONS OF SURETY'S RISK
	DEFENSES OF SURETY AGAINST THE CREDITOR - PERSONAL/REAL DEFENSES Some "___________" defenses are NOT available to a surety (ie. infancy, lunacy, ultra vires, discharge in bankruptcy). Other defenses of the principal are generally ___________ to the surety (ie. fraud, duress, breach of K by the creditor, payment of debt by the principal, forgery).	DEFENSES OF SURETY AGAINST THE CREDITOR - PERSONAL/REAL DEFENSES Some "PERSONAL" defenses are NOT available to a surety (ie. infancy, lunacy, ultra vires, discharge in bankruptcy). Other defenses of the principal are generally AVAILABLE to the surety (ie. fraud, duress, breach of K by the creditor, payment of debt by the principal, forgery).
	DEFENSES OF SURETY AGAINST THE CREDITOR - FRAUD OR DURESS o FRAUD OR DURESS ON ________; and o FRAUD OR DURESS ON ________.	DEFENSES OF SURETY AGAINST THE CREDITOR - FRAUD OR DURESS o FRAUD OR DURESS ON PRINCIPAL; and o FRAUD OR DURESS ON SURETY.
	DEFENSES OF SURETY AGAINST THE CREDITOR - FRAUD/DURESS Fraud or duress ON PRINCIPAL: A surety is _____ LIABLE if the principal's promise is a result of fraud or duress of which the surety is _______.	DEFENSES OF SURETY AGAINST THE CREDITOR - FRAUD/DURESS Fraud or duress ON PRINCIPAL: A surety is NOT LIABLE if the principal's promise is a result of fraud or duress of which the surety is UNAWARE.
	DEFENSES OF SURETY AGAINST THE CREDITOR - FRAUD/DURESS Fraud or duress ON SURETY: If the principal fraudulently ________ someone to act as a _________, the surety is ______ LIABLE to the creditor UNLESS the creditor was a _______ to the fraud.	DEFENSES OF SURETY AGAINST THE CREDITOR - FRAUD/DURESS Fraud or duress ON SURETY: If the principal fraudulently INDUCED someone to act as a SURETY, the surety is STILL LIABLE to the creditor UNLESS the creditor was a PARTY to the fraud.

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