Nature Of Surety Agreement

In today`s world, many of us will be asked, at one stage or another, to insure the debts of another person or company, either for a friend, for a family, or as a director of a company. Before committing as collateral, you need to understand the nature and consequences of a surety agreement The FTC offers the following advice to people who have agreed to sign a bond agreement: people must be careful not to sign bonds because you assume responsibility for paying someone else`s debts. Once you have signed up as collateral, it is very difficult to escape liability because you do not know the guarantee clause contained in the agreement. According to current case law, the signatory of an agreement is required to familiarize himself with the content of a document he has signed. This confirms the reservation of the expression of Roman law, which means: “Be careful of the signatory”), but this applies to all those who enter into a contract and not just to guarantees. It is therefore important that, in order to protect yourself, you consult a lawyer before assuming responsibility for another person`s debts. In addition, first-application payment clauses, linked to an unconditional obligation and not subject to recourse or the absence of a right of objection to the debt, may lead to the conclusion that the agreement is a guarantee agreement. As a general rule, the guarantor may object to a contract that would have been available to the principal debtor (for example. B violation of the creditor; The impossibility or illegality of the benefit; fraud, coercion or misrepresentation by creditors; Prescription Refusal of the lender to accept the debtor`s offer or benefit or guarantee) In addition, the guarantee has some own defenses. Common safeguards taken by guarantees include: in the event of a late payment of the principal debtor, the guarantee is contractually obliged to fulfil its obligations, unless the client himself or someone on their behalf releases the obligation. If the warranty is guaranteed, it must do so in good faith.

Given that the principal debtor`s defence is generally limited and the guarantee has the right to be repaid by the debtor, it is not uncommon for debtors to claim that the guarantee acted in bad faith by doing things such as failure to conduct an appropriate investigation (to determine whether the debtor was insolvent), the claims paid , interference in the contact between the company and the debtor. , and inappropriate refusals to let the debtor complete the project.

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