Guaranty and suretyship both secure the performance of an obligation by a third person, but the difference between them decides how quickly a creditor can collect, and it is the most consequential distinction in accessory contracts. In GUARANTY, the guarantor binds himself to fulfill the obligation of the principal debtor IF THE LATTER SHOULD FAIL TO DO SO. The liability is therefore SUBSIDIARY or secondary and conditional: it arises only upon the debtor's default. The signature protection is the BENEFIT OF EXCUSSION (or exhaustion), by which the guarantor cannot be compelled to pay the creditor unless the latter has first exhausted all the property of the debtor and resorted to all the legal remedies against the debtor; to invoke it, the guarantor must set it up against the creditor upon demand and point out available property of the debtor within Philippine territory sufficient to cover the amount of the debt. The guarantor also enjoys the BENEFIT OF DIVISION where there are several guarantors of the same debt, so that the obligation is divided among them. In SURETYSHIP, the surety binds himself SOLIDARILY with the principal debtor. The surety is therefore a party to the principal obligation itself rather than merely to a collateral undertaking, and the liability is DIRECT, PRIMARY, AND ABSOLUTE: the creditor may proceed against the surety alone, immediately upon default, without first pursuing the debtor and without any benefit of excussion or division. The Civil Code makes this concrete by providing that if a person binds himself solidarily with the principal debtor, the provisions on joint and solidary obligations apply, and that such a contract is called a suretyship. Practical consequences follow. A guaranty must be EXPRESS and in writing to be enforceable under the Statute of Frauds, as must a suretyship, and neither is presumed. Both are ACCESSORY, so the extinguishment of the principal obligation extinguishes them, and both guarantor and surety may raise the defenses inherent in the obligation, though not the debtor's purely personal defenses. Both are entitled to REIMBURSEMENT from the debtor upon payment and are legally SUBROGATED to the creditor's rights. An extension of time granted by the creditor to the debtor without the guarantor's consent extinguishes the guaranty. So a guarantor pays only after the debtor's assets are exhausted, while a surety is solidarily and immediately liable.
The Core Difference
A GUARANTOR answers only IF the debtor fails — liability is subsidiary and conditional. A SURETY binds himself SOLIDARILY with the debtor — liability is direct, primary, and absolute.
The Benefit of Excussion
A guarantor cannot be compelled to pay unless the creditor has first exhausted all the debtor's property and legal remedies. To use it, the guarantor must set it up on demand and point out available property of the debtor within the Philippines sufficient to cover the debt. A guarantor also has the BENEFIT OF DIVISION among co-guarantors.
The Surety Has Neither
The creditor may proceed against the surety alone, immediately on default, without pursuing the debtor — no excussion, no division.
What They Share
- Both must be EXPRESS and in writing; neither is presumed;
- Both are ACCESSORY — extinguishing the principal obligation extinguishes them;
- Both may raise defenses inherent in the obligation, but not the debtor's purely personal ones; and
- Both get reimbursement and subrogation on paying.
A Trap for Creditors
An extension of time granted to the debtor without the guarantor's consent EXTINGUISHES the guaranty.
Frequently Asked Questions
What is the difference between a surety and a guarantor? A guarantor is only secondarily liable and answers if the debtor fails, with the benefit of excussion. A surety binds himself solidarily with the debtor and is directly, primarily, and absolutely liable from the moment of default.
What is the benefit of excussion? The guarantor's right not to be compelled to pay unless the creditor has first exhausted all the property of the debtor and all legal remedies against the debtor. The guarantor must invoke it on demand and point out sufficient property within the Philippines.
Can a creditor sue the surety without suing the debtor? Yes. Because the surety is solidarily liable, the creditor may proceed against the surety alone immediately upon default, without first pursuing the principal debtor.
Does giving the debtor more time release the guarantor? Yes. An extension of time granted by the creditor to the debtor without the guarantor's consent extinguishes the guaranty.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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