Also known as:principal surety · principal and surety · suretyship · surety relationship
Written by attorneys · grounded in primary & secondary sources — see below
A suretyship relationship in which one party is primarily liable on an obligation as the principal obligor while another party stands secondarily liable as the surety. The relationship arises when a transferor of mortgaged property remains personally liable after the transferee assumes the debt, or when one party contracts to answer for the duty of another. The surety may invoke defenses available under suretyship law and may seek exoneration, reimbursement, or subrogation from the principal.
Sources & Authorities· 7 primary sources
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Uniform Acts
Restatements
Hornbooks
How it applies
Common Examples
2
Mortgage Modification Discharges Surety
Patricia Patel personally guaranteed a loan secured by a factory owned by her company. After she sold the factory to Pioneer Energy with an express assumption of the mortgage, the lender and Pioneer Energy agreed to double the loan amount to fund an expansion. When Pioneer Energy later defaulted, the lender sought a deficiency from Patricia. Because the increase materially raised her risk without her consent, suretyship defenses released her from personal liability.
Oral Promise to Answer for Debt
Pablo Perez orally promised a supplier that he would pay any invoices left unpaid by his brother's new business. When the business defaulted, the supplier sued Pablo on the oral promise. The court held the promise unenforceable under the statute of frauds because it was a contract to answer for the duty of another without a signed writing.
Common questions
Frequently Asked
4
When does a transferor of mortgaged property become a surety rather than a principal obligor?+
A transferor becomes a surety when the transferee expressly assumes the mortgage obligation. The transferee then occupies the position of principal obligor while the transferor remains secondarily liable to the mortgagee. This shift occurs even if the transferor has not yet paid any portion of the debt.
Supporting sources
What remedies does the surety-transferor have against an assuming transferee?+
The transferor may compel the transferee to perform the assumed obligation through a direct action for exoneration. The transferor need not first pay the mortgagee or wait for foreclosure. A court may order the transferee to pay the mortgagee directly or enter a money judgment that must be applied to the debt.
Supporting sources
How can a transferor-surety be discharged from personal liability after assumption?+
Discharge occurs if the mortgagee grants an express release or if suretyship defenses apply. A material modification of the obligation by the mortgagee and the transferee, such as a substantial increase in the loan amount without the transferor's consent, triggers discharge to the extent the risk increased.
Supporting sources
Does the statute of frauds apply to every suretyship promise?+
The statute of frauds requires a signed writing for a promise to answer for the duty of another. The rule does not apply when the promisor's main purpose is to serve its own pecuniary interest rather than to guarantee another's debt.
Supporting sources
Real PropertyMortgages/security devices · ForeclosureUBEIntermediate