The guaranty

A guaranty is a contract to fulfill an obligation, but it must be express and may not extend to more than what has been stipulated in an agreement.

By Riva Khristine Maala

A guaranty is a contract through which a guarantor pledges to fulfill the obligation of a debtor in case the debtor fails to do so. The guarantor's liability is limited to that of a subsidiary, meaning he pays only if the debtor is unable to do so. And the law grants the guarantor the benefit of excussion: He cannot be compelled to pay the creditor unless the creditor has exhausted the debtor's properties and used all legal remedies available to dun him.

In order to protect himself with excussion, the guarantor must show proof that the debtor's properties are enough to cover his debts. But he may not protect himself with excussion if he has expressly renounced it, if the debtor fails to pay, absconds, cannot be sued within the Philippines, or does not have enough resources to cover his obligation, and if he, the guarantor, is a judicial bondsman. Once the guarantor pays for the debts of a defaulting debtor, the debtor must, in turn, pay the guarantor the full amount due him plus interest, expenses and damages.

A guaranty is merely an accessory contract as it supports a principal obligation. If the principal obligation is void from the beginning, the guaranty also becomes void-although a guaranty may be valid even if the principal obligation cannot be enforced or is subsequently annulled.

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