GUARANTY, or GUARANTEE, is a contract b one person hinds himself to pay a debt or do some act in case of the failure of some other person, whose debt or duty it is to do the thing guaranteed. The person so binding himself is generally- called the surety in England, while the person who is primarily liable is called the principal. Thus, whore borrows money, and B joins as a party in a bill of exchange or a bond to secure the loan. B is a surety. Where B guarantees that certain goods which are supplied to A shall lie paid for, lie is more usually styled a guarantor than a surety, but the liability is tne strum.
Such a contract must be in writing, for the statute of frauds (29) Charles II. c. required that no action should be brought whereby to charge the defendant upon any special promise to answer for the debt, default, or nitscarriage of another person, unless the agreement or sonic, memorandum or note thereof should be in writing and signed by the party to be charged therewith, or some other person by him lawfully authorized. So that a surety can only be bound by sonic writing sWned by himself or his agent. And lord Tenterden's act. (9 Geo. IV. c. 14, s. 6) saute thing as to persons nicking representations as to the character, ability, or dealings of another, whir intent that the latter may obtain credit. In order to bind the surety, there must also be no deceit or misrepreseutation used as to the nature of the risk or as to the state of the accounts. If a guaranty is given to a firm, it is not binding after a change in the firm,
unless the parties expressly.stipulate to the contrary. If the creditor discharge the prin cipal, or even give time, by way of indulgence to him, the surety is released, for he is thereby put to a disadvantage. In general, the creditor can sue either the principal or the surety for the debt at his option. if the surety is obliged to pay the debt of his prin cipal lie can sue the principal tor the money so paid, and is entitled to have all the secu rities assigned to him, so its to enable hint to do so more effectually.
In Scotland the law is substantially the same as regards principal and surety. or, as they are there called, principal and cautioner; but there arc some minor differences., though many of the differences which formerly existed between the laws of the two countries were swept away by the statutes 19 and 20 Vict. c. 97. and 19 and 20 Vict. c. 60, The chief differences now are, that in Scotland it is not necessary to prove any consideration for the contract, though the contract is not by deed; that liability of the surety continues seven years, whereas in England it continues generally only six years —and that the discharge of the surety can be proved only by the writ or oath of the creditor, whereas in England it can be proved by oral evidence. See Paterson's Comp.
of E. and S. Law.