Personal Guarantees between Commercial Law and Consumers in the United States

29 Pages Posted: 15 Oct 2014 Last revised: 13 Nov 2014

Date Written: 2014

Abstract

Guaranties and suretyships reduce the risk of default and today remain essential arrangements in many commercial and consumer transactions. A guarantor or surety promises to pay for the debt of a third party and may become primarily liable on that debt. Despite the significance of such a promise and the resulting obligation, U.S. law does not clearly distinguish between a guarantor and surety in a consumer or commercial context. This is of particular relevance, because in a consumer context a guaranty often has a gratuitous or sentimental element and a guarantor may not always be fully aware of the risks and liabilities involved with a guarantee promise. U.S. law generally considers guaranties and suretyships simply as third-party beneficiary contracts to which common law contract principles apply. This, in turn, makes guaranties and suretyships primarily a state law concern, resulting in significant differences of suretyship laws among all U.S. jurisdictions. As such, the U.S. lacks a uniform body of law in this area and makes consumer protection in a guaranty and suretyship context perfunctory at best.

Keywords: United States, Commercial Law, Contract Law, Conflict of Laws, Third Parties, Guarantee, Guaranty, Surety, Suretyship

JEL Classification: K10, K11, K12, K19, K20, K39, K40, K41, K42, K49

Suggested Citation

Henkel, Christoph, Personal Guarantees between Commercial Law and Consumers in the United States (2014). American Journal of Comparative Law, Vol. 62, 333 (2014), Mississippi College School of Law Research Paper No. 2014-09, Available at SSRN: https://ssrn.com/abstract=2509972

Christoph Henkel (Contact Author)

Drake University Law School ( email )

27th & Carpenter Sts.
Des Moines, IA 50311
United States

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