Guarantor or Surety of a Negotiable Instrument - Explained
What is a Guarantor or Surety?
Written by Jason Gordon
Updated at April 6th, 2023
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What is the role of a guarantor or surety of a negotiable instrument?
A guarantor (also known as a surety or co-signor) serves to add certainty of payment of a negotiable instrument. A guarantor of a note or draft is an accommodation party who signs the instrument as an indorser.
Next Article: Negotiable Instrument - Accord & Satisfaction Back to: COMMERCIAL PAPER
What are the Types of Guarantor?
There are a couple of forms of guarantor, as follows:
What is a Guarantor of Payment?
A co-maker's accommodation indorsement guarantees payment. The holder may demand payment from her without first seeking payment from other co-maker.
What is a Guarantor of Collection?
A collection guarantor is an accommodation party who is liable only if a judgment is rendered against a payor and the judgment is uncollectible against the debtor or is returned unsatisfied.
Discussion Question
Why do you think the UCC provides for a distinction between a guarantor of payment versus a guarantor of collection?
Practice Question
Sara makes a promissory note payable to Dave or order. Dave does not want to accept the note from Sara because of her poor credit history. Angela, who has excellent credit, agrees to cosign the note to add certainty. What are the rights of the parties in this situation?
Related Topics
- Commercial Paper (Intro)
- What is Commercial Paper?
- Negotiable Instrument
- What are the common types of commercial paper?
- Promissory Note
- Cashier's Check
- Convenience Check
- Certified Check
- Substitute Check
- Bill of Exchange
- Bank Draft Definition
- Sight Draft Definition
- Bankers Acceptance
- Who is a Holder of a negotiable instrument?
- Commercial Paper Funding Program
- What is Negotiability and why is it important?
- What is required for commercial paper to be negotiable?
- Sum Certain (Contracts)
- Inflation Adjustment Clause
- When does commercial paper contain an Unconditional promise to pay?
- Backup Line of Credit
- What is Payable on Demand or Payable on Time?
- What is Order Paper and Bearer Paper?
- Bearer Form
- How is a payee identified on the negotiable instrument?
- What rules does the court apply in determining negotiability?
- How is commercial paper negotiated to a holder?
- What is Transfer of a negotiable instrument?
- What is Indorsement of a negotiable instrument?
- What are the various types of indorsement?
- Bank Endorsement
- Blank Endorsement
- Accommodation Endorsement
- How does a holder receive payment on a negotiable instrument?
- Who is potentially liable on (or obligated to pay) a negotiable instrument?
- When is an individual liable for a representative signing a negotiable instrument?
- What rules apply if a holder loses a negotiable instrument?
- When is payment of a negotiable instrument overdue?
- What effect does a negotiable instrument have on the underlying obligation?
- What is a holder in due course?
- What are the requirements for a holder to become a holder in due course?
- Receive an instrument for value?
- Receive an instrument in good faith?
- Receive an instrument without notice of a valid defense?
- How does discharge of the Underlying Obligation affect a holder in due course?
- What is the Shelter Rule?
- Can you limit a transferee from becoming a holder in due course?
- Personal Defenses?
- Real Defenses?
- What is a Claim in Recoupment?
- What are the rights of a holder in due course if the instrument involves a consumer transaction?
- What happens if a negotiable instrument is Forged?
- What happens if a negotiable instrument is Stolen?
- Guaranty or Guarantee
- Letter of Guarantee
- Personal Guarantee
-
What is the role of a Guarantor or Surety of a negotiable instrument?
-
Surety
- Cosign
- Accommodation Paper Definition
- Secondary Liability
- Avalize Definition
- What is an Accord & Satisfaction?
- What is primary and secondary liability on an instrument?
- What is Drawer or Maker Liability for a negotiable instrument?
- What is Transferor Warranty of a negotiable instrument?
- What is Indorser Warranty of a negotiable instrument?
- What is Presentment Warranty of a negotiable instrument?
- What is a warrantors liability for a dishonored note or draft?
- What is the time limitation for warranty of a negotiable instrument?
- When are the warranties of a negotiable instrument discharged?