Also known as: suretyship contract · suretyship · surety contract · surety contracts · contract of suretyship
Written by attorneys · grounded in primary & secondary sources — see below
A contract in which one party promises to answer for the duty of another. The promise creates secondary liability that arises only when the principal obligor fails to perform. Such contracts fall within the Statute of Frauds and require a signed writing for enforcement.
Sylvia Santos sold her factory to Sterling Manufacturing under an agreement that credited the outstanding mortgage balance against the purchase price. When Sterling later defaulted, the mortgagee modified the loan terms without Sylvia's consent. Sylvia invoked suretyship defenses and obtained a court order releasing her from further personal liability on the original obligation.
Samuel Soto orally assured Silverline Industries that he would cover any shortfall if Sean Steele failed to pay for equipment delivered under their supply contract. When Steele defaulted, Silverline sued Soto for the unpaid amount. The court dismissed the claim because the promise lacked a signed writing satisfying the Statute of Frauds.
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The promise must appear in a signed memorandum that identifies the parties, the principal obligation, and the surety's undertaking. Oral assurances alone do not satisfy the requirement.
When the transferee assumes the mortgage debt or receives a price credit for the mortgage balance, the original mortgagor becomes a secondary obligor entitled to suretyship defenses and remedies such as exoneration and subrogation.
Yes. An express release from the mortgagee or a material modification of the obligation without the transferor's consent can discharge the transferor under suretyship defenses even if the transferee assumed the debt.