Chapter 31

COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 1CHAPTER 31 GUARANTY Article 1. Definition of Guaranty . Article 2. Creation of Guaranty . Article 3. Interpretation of Guaranty . Article 4. Liability of Guarantors. Article 5. Continuing Guaranty . Article 6. Exoneration of Guarantors. ARTICLE 1 DEFIN ITION OF GUARANTY § 31101. What is a Guaranty . § 31102. Knowledge of Principal Unnecessary . § 31101. What is a Guaranty. A guaranty is a promise to answer for the debt, default, or miscarriage of another person. SOURCE: CC § 2787. § 31102. Knowledge ofPrincipal Unnecessary. A person may become guarantor even without the knowl edge or consent of the principal. SOURCE: CC § 2789. NOTE: No 1970 Civil Code '§ 2789 -2791 existed. ---------- ARTICLE 2 CREA TION OF GUARANTY § 31201. Necessity of Consider ation. § 31202. Guaranty in Writing. § 31203. For the Obligation of Another, Original. § 31204. Acceptance of Guaranty . COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 2§ 31201. Necessity of Consideration. Where a guaranty is entered into at the same time with the original obligation, or with the a cceptance of the latter by the guarantee, and forms with that

RANTY 2§ 31201. Necessity of Consideration. Where a guaranty is entered into at the same time with the original obligation, or with the a cceptance of the latter by the guarantee, and forms with that obligation a part of the consideration to him, no other consideration need exist. In all other cases, there must be a consideration distinct from that of the original obligation. SOURCE: CC § 2 792. § 31202. Guaranty in Writing. Except as prescribed by the next section, a guaranty must be in writing, and signed by the guarantor; but the writing need not express a consideration. SOURCE: CC § 2793. § 31203. For the Obligation of Another , Origi nal. A promise to answer for the obligation of another, in any of the following cases, is deemed an original obligation of the promisor , and need not be in writing: 1. Where the promise is made by one who has received property of another upon an undertakin g to apply it pursuant to such promise ; or byone who has received a dis charge from an obligation, in whole or in part, in consideration of such promise; 2. Where the creditor parts with value, or enters into an obligation, in consideration of the obligat ion in respect to which the promise

ation, in whole or in part, in consideration of such promise; 2. Where the creditor parts with value, or enters into an obligation, in consideration of the obligat ion in respect to which the promise is made, in terms or under circumstances such as to render the party making the promise the principal debtor , and the person in whose behalf it is made, his surety; 3. Where the promise, being made for an anteced ent obl igation of another , is made upon the consider ation that the party receiv ing it cancels the antecedent obligation, accepting the new promise as a substitute therefor; or upon the consideration that the party receiving it releases the property of another f rom a levy ; or his person from imprisonment under an execution on a judg ment obtained upon the antecedent obligation or upon a consideration beneficial to the promisor , whether moving from either party to the antecedent obligation, or from another person;COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 34. Where a factor undertakes, for a com mission, to sell merchandise and guarantee the sale; 5. Where the holder of an instrument for the payment of money , upon which a third person is or may become

4. Where a factor undertakes, for a com mission, to sell merchandise and guarantee the sale; 5. Where the holder of an instrument for the payment of money , upon which a third person is or may become liable to him, trans fers it in payment of a precedent debt of his own, or for a new consideration, and in connection with such transfer enters into a promise respecting such instrument. SOURCE: CC § 2794. § 31204. Acceptance of Guaranty. A mere offer to guarantee is not binding, until notice of its accept ance is communicated by the guarantee to the guarantor; but an absolute guaranty is binding upon the guarantor without notice of acceptance. SOURCE: CC § 2795. NOTE: No 1970 Civil Code '§ 2796 -2798 existed. ---------- ARTICLE 3 INTERPRET ATION OF GUARA NTY § 31301. Incomplete Contract Guaranteed. § 31302. Guaranty of Obligation. § 31303. Recovery of Guaranty . § 31304. Guarantor's Liability . § 31301. Incomplete Contract Guaranteed. In a guaran tyof a contract, the terms of which are not then settl ed, it is implied that its terms be such as will not expose the guarantor to greater risks than he would incur under those terms which are most common in similar contracts at the place

not then settl ed, it is implied that its terms be such as will not expose the guarantor to greater risks than he would incur under those terms which are most common in similar contracts at the place where the principal contract is to be performed. SOURCE: CC § 2799. §31302. Guaranty of Obligation. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 4A guaranty to the effect that an obligation is good, or is collectible, imports that the debtor is solvent, and that the demand is collectible by the usual legal proceedings, if taken with reasonable diligence. SOURCE: CC § 2800. § 31303. Recovery of Guaranty. A guaranty , such as is mentioned in the last section, is not discharged byan omission to take proceedings upon the principal debt, or upon any collateral security for its payment, if no part of the debt could have been collected thereby . SOURCE: CC § 2801. § 31304. Guarantor's Liability. In the cases mentioned in § 31302, the removal of the principal from Guam, leaving no property therein from which the obligation might be satisfied, is equiv alent to the insolve ncy of the principal in its effect upon the rights and obligations of the guarantor. SOURCE: CC § 2802.

no property therein from which the obligation might be satisfied, is equiv alent to the insolve ncy of the principal in its effect upon the rights and obligations of the guarantor. SOURCE: CC § 2802. NOTE: No 1970 Civil Code '§ 2803 -2805 existed. ---------- ARTICLE 4 LIABILITY OF GUARANTORS § 31401. How Guaranty to be Construed. § 31402. Liabi lity, Guaranty of Payment. § 31403. Liability on Conditional Obligation. § 31404. Obligation Limited to Principals. § 31405. Void on Illegal Contract. § 31401. How Guaranty to be Construed. A Guaranty is deemed to be unconditional unless its term s import some condition precedent to the liability of the guarantor . SOURCE: CC § 2806. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 5§ 31402. Liability, Guaranty of Payment. A guarantor of payment or performance is liable to the guarantee immedi ately upon the default of the principal, and without dem and or notice. SOURCE: CC § 2807. § 31403. Liability on Conditional Obligation. Where one guarantees a conditional obligation, his liability is commensurate with that of the principal, and he is not entitled to notice of the default of the principal, un less he is unable, by the

Where one guarantees a conditional obligation, his liability is commensurate with that of the principal, and he is not entitled to notice of the default of the principal, un less he is unable, by the exercise of reasonable diligence, to acquire information of such default, and the creditor has actual notice thereof. SOURCE: CC § 2808. § 31404. Obligation Limited to Principals. The obliga tion of a guarantor must be neither larger in amount nor in other respects more burdensome than that of the principal, and if in its term s it exceeds it, it is reducible in proportion to the principal obligation. SOURCE: CC § 2809. § 31405. V oid on Illegal Contract. A guarantor is not lia ble if the contract of the principal is unlawful, but he is liable, notwithstanding any mere personal inability of the principal, though the disability be such as to make the contract void against the principal. SOURCE: CC § 2810. NOTE: No 1970 Civil Cod e '§ 2811 -2813 existed. ----------- ARTICLE 5 CONTINUING GUARANTY § 31501. What is Continuing Guaranty . § 31502. Revocation of Continuing Guaranty . COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 6§ 31501. What is Continuing Guaranty.

ONTINUING GUARANTY § 31501. What is Continuing Guaranty . § 31502. Revocation of Continuing Guaranty . COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 6§ 31501. What is Continuing Guaranty. A guaranty relating to a future liability of the principal, un der succes - sive transactions, which either continue his liability or from time to time renew it after it has been satisfied, is called a continuing guaranty . SOURCE: CC § 2814. § 31502. Revocation of Continuing Guaranty. A continuing guaranty may be rev oked at any time by the guarantor , in respect to future transactions, unless there is a continuing con sideration as to such transactions which he does not renounce. SOURCE: CC § 2815. NOTE: No 1970 Civil Code '§ 2816 -2818 existed. ---------- ARTICLE 6 EXONERA TION OF GUARANTORS § 31601. What Dealings with Debtor Exonerates Guar antor . § 31602. Void Promises. § 31603. Rescission of Alteration. § 31604. Part Performance. § 31605. Delay of Creditor does not Discharge Guarantor . § 31606. Guarantor Indem nified by Debtor, not Exon erated. § 31607. Discharge of Principal by Law , Guarantor not Released. § 31601. What Dealings with Debtor Exonerates Guaran tor.

arge Guarantor . § 31606. Guarantor Indem nified by Debtor, not Exon erated. § 31607. Discharge of Principal by Law , Guarantor not Released. § 31601. What Dealings with Debtor Exonerates Guaran tor. A guarantor is exonerated, except so far as he may be indemnified by the princi pal, if by any act of the creditor, without the consent of the guarantor , the original obligation of the principal is altered in any re spect, or the remedies or rights of creditor against the principal, in respec t thereto, are in any way impaired or suspended. SOURCE: CC § 2819. § 31602. V oid Promises. COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY 7A promise by a creditor , which for any cause is void, or void able by him at his option, does not alter the obligation or suspend or impair the remedy , within the meaning of the last section. SOURCE: CC § 2820. § 31603 . Rescission of Alteration. The rescis sion of an agreement altering the original obliga tion of a debtor, or impairing the remedy of a creditor , does not restore the liability of a guarantor who has been exonerated by such agreement. SOURCE: CC § 2821. § 31604. Part Performance.

obliga tion of a debtor, or impairing the remedy of a creditor , does not restore the liability of a guarantor who has been exonerated by such agreement. SOURCE: CC § 2821. § 31604. Part Performance. The acceptance, by a creditor , of anything in partial satisfaction of an obligation reduces the obligation of a guarantor thereof, in the same measure as that of the principal, but does not otherwise affect it. SOURCE: CC § 28 22. § 31605. Delay of Creditor does not Discharge Guaran tor. Mere delay on the part of a creditor to proceed against the principal, or to enforce any other remedy , does not exonerate a guarantor . SOURCE: CC § 2823. § 31606. Guarantor Indemnified by De btor, not Exoner ated. A guarantor , who has been indem nified by the principal, is liable to the creditor to the extent of the indemnity , notwithstanding that the creditor, without the assent of the guarantor, may have modified the contract or released th e principal. SOURCE: CC § 2824. § 31607. Discharge of Principal by Law, Guar antor not Released. A guarantor is not exonerat ed by the discharge of his principal by operation of law , without the intervention or omission of the creditor. SOURCE: CC § 28 25.

cipal by Law, Guar antor not Released. A guarantor is not exonerat ed by the discharge of his principal by operation of law , without the intervention or omission of the creditor. SOURCE: CC § 28 25. NOTE: No 1970 Civil Code '§ 2826 -2830 existed. ----------COL12010618GCA BUSINESS STRUCTURE &FUNCTION CH.31GUARANTY