Also known as: suretyship · surety relation · surety
Written by attorneys · grounded in primary & secondary sources — see below
A legal relationship in which one party stands as secondary obligor for the debt or duty of another who is the principal obligor. The secondary obligor gains rights to exoneration, reimbursement, restitution, and subrogation when the principal defaults or impairs the secondary obligor's position.
Stonehaven Properties prepared an internal memo analyzing its exposure on a performance bond after a subcontractor defaulted. Silverline Industries, the general contractor, sought the memo in discovery. The court denied the request because the memo was prepared in anticipation of litigation by a surety's representative.
Sebastian Santos sold his mortgaged warehouse to Solstice Ventures, which assumed the loan. Sterling Manufacturing, the lender, later extended the maturity and raised the interest rate without Sebastian's consent. Sebastian invoked suretyship defenses and obtained a discharge from personal liability on the note.
Select any source to read its text and confirm it supports the definition.
Scott Summers orally promised a supplier that he would answer for Spencer Silver's unpaid invoice if Spencer defaulted. When the supplier sued Scott after Spencer's bankruptcy, the court dismissed the claim because the promise was not evidenced by a signed writing.
Sydney Santos transferred her mortgaged office building to Sabrina Shah under an assumption agreement. When Sabrina stopped making payments, Sydney sued Sabrina to compel direct payment to the lender before Sydney herself paid anything.
Sierra Santos sold her apartment complex to Spencer Silver, who assumed the mortgage. The lender later released collateral and extended the term without Sierra's agreement. Sierra successfully asserted a suretyship defense that discharged her personal liability.
Sebastian Santos paid the full balance on a note after the assuming buyer defaulted. He then sought to enforce the mortgage lien against the property by subrogation to the lender's position.
An assumption occurs when the transferee promises to perform the mortgage obligation. The transferor then becomes the secondary obligor and the transferee the principal obligor under suretyship principles.
Supporting sources
Yes. When the creditor and principal debtor materially change the obligation in a way that increases the surety's risk without the surety's consent, suretyship defenses discharge the secondary obligor from personal liability.
Supporting sources
The secondary obligor may compel the principal to perform the obligation directly, obtain reimbursement after payment, or enforce subrogation to the creditor's security interest.
Supporting sources
No. While an express release discharges the transferor, suretyship defenses arising from the creditor's conduct with the assuming grantee can also discharge personal liability without any formal release.
Supporting sources
…history of the Fourteenth Amendment in its reliance on the "compelling state interest" test. See Weber v. Aetna Casualty & Surety Co. , 406 U. S. 164, 179 (1972) (dissenting opinion). But the Court adds a new wrinkle to this test by transposing it from the legal considerations associated with the Equal Protection…