Personal Guarantees between Commercial Law and Consumers in the United States
American Journal of Comparative Law, Vol. 62, 333 (2014)
Mississippi College School of Law Research Paper No. 2014-09
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: Suggested Citation