surety

One who at the request of another, and for the purpose of securing to him a benefit, becomes responsible for the performance by the latter of some act in favor of a third person, or hypothecates property as security therefor. One who undertakes to pay money or to do any other act in event that his principal fails therein. A person who is primarily liable for payment of debt or performance of obligation of another. Branch Banking and Trust Co. v. Creasy, 301 N.C. 44, 269 S.E.2d 117, 122.

One bound with his principal for the payment of a sum of money or for the performance of some duty or promise and who is entitled to be indemnified by some one who ought to have paid or performed if payment or performance be enforced against him. Term includes a guarantor. U.C.C. No. 1-201(40).

See also suretyship; suretyship, contract of.

Guarantor and surety compared.

A surety and guarantor have this in common, that they are both bound for another person; yet there are points of difference between them. A surety is usually bound with his principal by the same instrument, executed at the same time and on the same consideration. He is an original promisor and debtor from the beginning, and is held ordinarily to every known default of his principal. On the other hand, the contract of guarantor is his own separate undertaking, in which the principal does not join. It is usually entered into before or after that of the principal, and is often founded on a separate consideration from that supporting the contract of the principal. The original contract of the principal is not the guarantor's contract, and the guarantor is not bound to take notice of its nonperformance. The surety joins in the same promise as his principal and is primarily liable; the guarantor makes a separate and individual promise and is only secondarily liable. His liability is contingent on the default of his principal, and he only becomes absolutely liable when such default takes place and he is notified thereof.

"Surety" and "guarantor" are both answerable for debt, default, or miscarriage of another, but liability of guarantor is, strictly speaking, secondary and collateral, while that of surety is original, primary, and direct.

In case of suretyship there is but one contract, and surety is bound by the same agreement which binds his principal, while in case of guaranty there are two contracts, and guarantor is bound by independent undertaking. Howell v. Commissioner of Internal Revenue, C.C.A.8, 69 F.2d 447, 450.

A surety is an insurer of the debt or obligation of another; a guarantor is an insurer of the solvency of the principal debtor or of his ability to pay.

Under U.C.C., term "surety" includes a guarantor. No. 1-201(40).

See also guarantor

- surety bond

@ surety bond

See performance bond

@ surety company

A company, usually incorporated, whose business is to assume the responsibility of a surety on the bonds of officers, trustees, executors, guardians, etc., in consideration of a fee proportioned to the amount of the security required

@ surety insurance

This phrase is generally used as synonymous with "guaranty insurance."

@ surety of the peace

A species of preventive justice, and consists in obliging those persons whom there is a probable ground to suspect of future misbehavior, to stipulate with, and to give full assurance to, the public that such offense as is apprehended shall not take place, by finding pledges or securities for keeping the peace, or for their good behavior

@

- suretyship