Question

Give two reasons why the surety-guarantor distinction is important.

Answer 1

A distinction between a surety and a guarantor is important since they have a very thin line of differentiation and often people get confused with this. Surety or guarantor both are the parties who take liability for the primary debtor. When the debtor fails to repay the debt or goes bankrupt or absconds the liability for repayment falls on the person who has given surety for the credit or agreed for being a guarantor. Hence it is important for the individuals to have clarity before they play the role of a surety of a debtor. In some instances the surety or the debtor might even be jailed if the prime debtor fails to repay.

In both cases a contract is required wherein a contract of surety can be oral but a contract of guarantor has to be enforced in writing.

Though a contract of surety is in oral, the surety is primarily responsible for the debt along with the debtor whereas in the case of a guarantor, they are secondarily liable.

Hence it is important that there is a distinction between the surety and the guarantor.