Chapter 1 – Nature and Extent of Contract obligation
As to promise A special promise; Liable the instant
Characteristics: Shall cover the the contract is
obligation the agreed upon
Accessory – dependent on a principal obligation moment the
Consensual – perfected by mere consent principal debtor
Nominate – definite name under the Civil Code fails
As to form Guaranteed by the Not covered by the
Gratuitous – guarantor does not receive any
Statutes of Fraud Statutes of Fraud
consideration for his guaranty. hence it must be in because it is a
writing primary obligation
Definition:
As to liability Benefit of Fully liable as if the
A guarantor binds himself to the creditor to fulfill the exhaustion debt was his to
begin with.
obligation of the principal debtor in case the latter should fail to
do so.
Kinds of Guarantee:
If a person binds himself solidarily with the principal
debtor, the contract is called a suretyship. As to manner of creation:
Parties: 1. Conventional – created by the agreement of the parties
2. Legal – Created by provision of law
Atleast three persons are involved in a contract of
3. Judicial – Created by a court decree
guaranty:
As to consideration:
Principal Debtor
Principal Creditor 1. Gratuitous – guarantor receives no consideration
Guarantor – person who undertakes to fulfill the 2. Onerous – guarantor receives a valuable consideration
obligation should the principal debtor fail to do so.
Guaranty may be entered into w/o the knowledge or consent
Distinction between Guaranty and Surety: of the principal debtor; Guarantor may be entitled to
reimbursement only up to the amount beneficial to the debtor.
Guarantee Surety
As to Obligation Collateral to that of Directly and If consented and agreed upon, guarantor is entitled to receive
the principal debtor primarily liable for full reimbursement.
the debt or
Sub-Guaranty – another guarantor guaranties in favor of a - Creditor shall bear the loss due to his negligence in
guarantor. exhausting the property pointed out by the guarantor.
Co-Guaranty – two guarantors guaranty the same obligation. When Guarantor loses the Benefit of Exhaustion:
Extent of Guaranty: 1. When he expressly renounces it
2. When he bounds himself to be solidarily liable with the
1. Guarantor may bind himself for less, but not more than debtor (change from guaranty to surety)
the principal obligation. 3. In case of solvency of the debtor (must be judicially
2. Guaranty may also be a security of a future debt which declared)
the amount is not yet known. 4. When he has absconded or cannot be sued within the
3. Guaranty cannot be presumed; it must be express and PH except if he has left a manager or representative
cannot extend to more than what is stipulated therein. 5. Fails to point out the available properties of the debtor
Qualifications of Guarantor: within the PH.
1. Must possess integrity Sub-Guarantor’s Benefit of Excussion
2. Must have the capacity to bind himself Sub-guarantor shall enjoy the same benefit of
3. Must have sufficient assets to answer the guaranteed excussion as the Guarantor with respect to the principal
obligation. debtor.
Married woman may bind herself as guarantor w/o the Several Guarantor of One Debtor
husband’s consent given under the Family Code but she
cannot bind conjugal property. 1. Benefit of exhaustion
2. Division of obligation among themselves
Chapter 2 – Effects of Guaranty
A. Between Guarantor and Creditor B. Between Debtor and Guarantor
- Guarantor is given the right of exhaustion before Guarantor who pays the debt has the following rights
creditor may go after the guarantor. against the Debtor
- Guarantor must point out the available properties of the 1. To be indemnified by the debtor of:
debtor in the Philippines sufficient to cover the debt in a. Total amount of debt
b. Legal interest thereon from the time of
order for him to enjoy the right of exhaustion.
payment was made known to the debtor
c. Expenses incurred by the guarantor after Liability of Sub-Guarantor in case of Insolvency of
having notified the debtor that payment had Guarantor
been demanded of him
d. Damages if any Sub-guarantor is responsible to the co-guarantors in
2. Subrogated by virtue thereof to all the rights which the same terms as the guarantor in case of insolvency of the
the creditor had against the debtor. person he guaranteed.
3. May sue or demand for reimbursement for
Chapter 3 – Extinguishment of Guaranty
accomplishing the debt from the person requesting
him to be a guarantor due to an absent debtor or a Additional acts that extinguish contract of guaranty:
request of another.
1. Acceptance by the creditor of immovable or other
Effects of Compromise property in payment of the debt
2. Extension of time granted to the Debtor without the
Compromise between Debtor and Creditor benefits the
consent of the Guarantor.
guarantor but does not prejudice him. Compromise between 3. When by some act of the creditor, the guarantor cannot
Guarantor and Creditor also benefits but does not prejudice be subrogated to the rights, mortgages, and
the principal Debtor. preferences of the creditor.
Payment by Guarantor without informing Debtor 4. Release made by the creditor in favor of one of the
sub-guarantors without the consent of the other
Debtor may set up the same defenses against benefits all to the extent of the share of the released
Guarantor as if it were with the creditor during the time of the guarantor.
payment. The reason for this is that the Guarantor has
deprived the debtor of setting up the defenses against the
creditor and Guarantor should wait for the debtor to have the
opportunity to pay before he pays.
Payment by Guarantor before Maturity
If Guarantor pays before the expiration of the period,
he must wait until the period expires before he can seek
reimbursement from the debtor because he has deprived the
debtor of the benefit of the period unless the debtor has
ratified the early payment.
