GUARANTY. An undertaking to answer for another's liability, and collateral thereto. A collateral undertaking to pay the debt of another in case he does not pay it. Shaw, C. J., 24 Pick. Mass. 252.
It is distinguished from suretyship in being a secondary, while that is a primary, obliga tion; or, as sometimes defined, guaranty is an undertaking that the debtor shall pay; surety ship, that the debt shall he paid.
The undertaking is essentially in the alter native. A guarantor cannot be sued as a promisor, as the surety may: his contract must be specially set forth. A guarantor warrants the solvency of the promisor, which an indorser does not. 8 Pick. Mass. 423.
Guaranty is limited to mercantile under takings, or to instruments not under seal ; suretyship applies generally.
2. At common law, a guaranty could be made by parol ; but by the Statute of Frauds, 29 Car. II. c. 3, re-enacted almost in terms in the several states, it is provided that "No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person, .... unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized." The following classes of promises have been held not within the statute, and valid though made by parol.
First, where there is a liability pre-exist ent to the new promise.
1. Where the principal debtor is discharged by the new promise being made, 3 Bingh. N. c. 889; 5 Chandl. Wisc. 61; 28 Vt. 135 ; 29 id. 169; 5 Cush. Mass. 488; 8 Gray, Mass. 233; 1 Q. B. 933; 8 Johns. N.Y. 376; 13 Md. 141; 4 Bos. & P. 124; Browne, Stat. Fr. N 166, 193; and an entry of such discharge in the creditor's books is sufficient proof. 3 Hill, So. C. 41. This may be done by agreement to that effect, 1 All. Mass.405,by novation, by substitution, or by discharge under final pro cess, 1 Barnew. & Ald. 297; but mere for bearance, or an agreement to forbear press ing the claim, is not enough. 1 Smith, Lead. Cas. 5th Am. ed. 387; 6 Vt. 666.
2. Where the principal obligation is void or not enforceable when the new promise is made, and this is contemplated by the parties.
But if not so contemplated, then the new pry raise is void. Burge, Surety. 10; 2 Ld. Raym. 1085; 1 Burr. 373. But see, on this point, 17 Md. 283 ; 13 Johns. N. Y. 175; 6 Ga. 14.
3. So where the promise does not refer to the particular debt, or where this is unascer tained. 1 Wile. 305.
In these three classes the principal obliga tion ceases to exist after the new promise is mad% 4. Where the promisor undertakes for his own debt. But the mere fact that he is in debted will not suffice, unless his promise re fers to that debt ; nor is it sufficient if he subsequently becomes indebted on his own account, if not indebted when he promises, or if it is then contingent. 4 Hill, N. Y. 211. And if his own liability is discharged or non-existent, the promise is within the statute. 14 Penn. 473.
5. Where the new promise is in considera tion of property placed by the debtor in the promisor's hands. 1 Gray, Mass. 391; 41 Me. 559.
6. Where the promise• does not relate to the promisor's property, but to that of the debtor in the hands of the promisor.
7. Where the promise is made to the debtor, not the creditor ; because this is not the debt of " another" than the promisee. 1 Gray, Mass. 76; 11 Ad. & E. 438.
8. Where the creditor surrenders a lien on the debtor or his property, which the pro misor acquires or is benefited by, Fell, Guar. c. 2; Addison, Cont. 38 ; 7 Johns. N. Y. 463 ; 3 Burr. 1886 ; 2 Barnew. & Ald. 613 ; 21 N. Y. 412; but not so where the surrender of the lien does not benefit the promisor. 3 Mete. Mass. 396; 21 N. Y. 412.
In the five last classes, the principal debt may still subsist concurrently with the new promise, and the creditor will have a double remedy; but the fulfilment of the new promise will discharge the principal debt, because he can have but one satisfac tion. The repeated dicta, that if the prin cipal debt subsists, the promise is collateral and within the statute, are not sustainable. 30 Vt. 641. But the general doctrine now is that the transaction must amount to a purchase, the engagement for the debt being the consideration therefor, in whole or in part. 1 Gray, Mass. 391; 5 Cush. Mass. 488.