Also known as: suretyship obligation · surety obligations · suretyship
Written by attorneys — see sources below.
A secondary obligation by which one party agrees to answer for the duty of another. The obligation arises when a transferor of mortgaged real estate remains personally liable after the transferee assumes the debt or when a contract expressly promises performance of another's duty. It triggers the statute of frauds and supplies suretyship defenses that may discharge the secondary obligor.
Simon Stern sold his clinic building to Fair Clinical. The purchase price was credited with the outstanding mortgage balance and Fair Clinical agreed to handle future payments. When Fair Clinical defaulted, the lender sought payment from Simon. Because the lender had not released Simon and no suretyship defense applied, Simon remained personally liable on the original obligation.
Solomon Silver orally promised Summit Bank that he would pay Starlight Media's loan if the company defaulted. When Starlight defaulted, the bank sued Solomon on his oral promise. The court dismissed the claim because the promise was a contract to answer for the duty of another and therefore unenforceable without a signed writing.
The transferor becomes a secondary obligor when the transferee assumes the mortgage obligation or when the mortgage balance is credited against the purchase price. The transferor then holds suretyship rights including exoneration, reimbursement, and subrogation against the transferee.
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No. A contract to answer for the duty of another falls within the suretyship provision of the statute of frauds and is unenforceable unless evidenced by a signed writing.
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The transferor may be discharged by an express release from the mortgagee or by suretyship defenses such as material modification of the obligation without consent or impairment of collateral.
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Yes. The mortgagee may sue the transferor personally without first pursuing the assuming transferee, although the transferor may later seek exoneration or reimbursement from the transferee under suretyship principles.
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