NATURE OF A SURETY’S UNDERTAKING
1. CONTRACTUAL AND ACCESSORY BUT DIRECT—The contractual obligation of the surety is merely an accessory or collateral to the obligation contracted by the principal. BUT, his liability to the creditor is direct, primary, and absolute.
2. LIABILITY IS LIMITED BY THE TERMS OF THE CONTRACT—The extent of a surety’s liability is determined only by the terms of the contract and cannot be extended by implication.
3. LIABILITY ARISES ONLY IF PRINCIPAL DEBTOR IS HELD LIABLE—If the principal debtor and the surety are held liable, their liability to pay the creditor would be solidary. But, the surety does not incur liability unless and until the principal debtor is held liable.
a. A surety is bound by a judgment against the principal even though the party was not a party to
b. The creditor may sue, separately or together, the principal debtor and the surety (since they are solidarily bound).
c. Generally, a demand or notice of default is not required to fix the surety’s liability.
d. An accommodation party (one who signs an instrument as maker, drawer, acceptor, or indorser
without consideration and only for the purpose of lending his name) is, in effect, a surety. He is thus
liable to pay the holder of the instrument, subject to reimbursement from the accommodated party.
e. A surety bond is void where there is no principal debtor.
4. SURETY IS NOT ENTITLED TO EXHAUSTION—A surety is not entitled to the exhaustion of the properties of the principal debtor since the surety assumes a solidary liability for the fulfillment of the principal obligation.
5. THE UNDERTAKING IS TO THE CREDITOR, NOT TO THE PRINCIPAL DEBTOR—The debtor cannot claim that the surety breached its obligation to pay for the principal obligation because there is no obligation as between the surety and the debtor. If the surety does not pay, the
principal debtor is still not relieved of his obligation.
6. SURETY NOT ENTITLED TO NOTICE OF PRINCIPAL’S DEFAULT—the surety is bound to take notice of the principal’s default to perform the obligation
7. PRIOR DEMAND BY THE CREDITOR UPON PRINCIPAL NOT REQUIRED—the right of the creditor to proceed against the surety alone exists independently of his right to proceed against the principal where both surety and principal are equally bound
8. SURETY IS NOT EXONERATED BY NEGLECT OF ANOTHER TO SUE PRINCIPAL—mere want of diligence or forbearance doesn’t affect the creditor’s rights vis-à-vis the surety, unless the surety requires him by appropriate notice to sue on the obligation. The raison d’etre for the rule is that
there is nothing to prevent the creditor from proceeding against the principal at any time