Suretyships

Suretyship is a legal relationship where one party, the surety, agrees to be responsible for the debt or obligation of another party, the principal debtor, to a third party, the obligee. This means that if the principal debtor fails to fulfill their obligation, the surety will step in and ensure it is met. Suretyship is a common form of security, often used in financial transactions, contracts, and legal proceedings.

The surety's obligation is secondary to that of the principal debtor. This means the obligee must first attempt to recover from the principal debtor before turning to the surety. However, once the principal debtor defaults, the surety becomes liable. There are various types of suretyship, including common or simple suretyship, where the surety is only liable after the obligee has exhausted all remedies against the principal. In contrast, a joint and several suretyship makes the surety directly liable alongside the principal debtor from the outset.

Suretyship agreements must generally be in writing to be legally enforceable, a principle known as the Statute of Frauds. The surety's undertaking is gratuitous if they receive no compensation for assuming the obligation. If compensation is provided, it is considered a compensated suretyship or a guarantee. The surety has certain rights, such as the right of subrogation, which allows them to step into the shoes of the obligee and pursue the principal debtor for reimbursement after paying the debt.