The Concept and Function of Suretyship
For a creditor, the enforcement of a guarantee begins with understanding the legal nature of suretyship. Under Article 891 of the Civil Code of Georgia, under a contract of suretyship the surety undertakes an obligation to stand as surety before the creditor for a third person, for the performance of that person’s obligation. The surety thus answers to the creditor directly, with an obligation of its own, for the principal debtor’s performance.
The second part of the same article keeps the frame of suretyship open: suretyship may also be applied to future and conditional obligations. This means that the creditor and the surety may agree today on a guarantee for an obligation that will arise in the future or that depends on the occurrence of a condition — for example, for future claims connected with the completion of construction or the use of a loan. It is precisely this flexibility that keeps suretyship the principal protective instrument of creditors in banking and construction practice.
The Joint and Several Liability of Several Sureties
Article 896 answers one of the most frequent questions — what happens where the sureties for one and the same obligation are several persons. The rule is maximally favourable to the creditor: they answer as joint and several debtors, even where they have not jointly assumed the suretyship. The absence of an internal agreement between the sureties therefore does not limit the creditor’s right.
The practical consequence of solidarity is clear: the creditor may present its claim to all the sureties simultaneously or to any one of them, within any part of the amount. The question of the comparative shares of the sureties concerns their internal relationship and does not hinder the creditor’s claim. When preparing the action it is therefore a sound decision to indicate all the sureties as co-defendants — the practical prospect of enforcement is then at its greatest.
The Grounds on Which the Surety Is Released
Article 904 builds the position of the defending side in court. Where the surety assumes the suretyship on the instruction of the principal debtor, or where, in accordance with the rules on the management of another’s affairs without instruction, the surety is granted the rights of a mandatary towards the principal debtor, the surety may demand release from the suretyship in one of three cases: where the financial condition of the principal debtor has substantially deteriorated; where, after the establishment of the suretyship, recourse against the principal debtor has become substantially more difficult because of a change of residence or domicile; or where the creditor holds against the surety a document with an enforcement clause on performance.
The law also balances the parties’ interests: where the term for the performance of the principal obligations has not yet fallen due, the debtor may, instead of release, provide the surety with security. The rule on release also extends to the case where the suretyship has been assumed without instruction under the rules on the management of another’s affairs — the surety is then granted the rights of a mandatary towards the principal debtor.
The Practical Stages of Presenting the Claim
The path of enforcement unfolds in two stages. The first is the stage of civil circulation: the creditor presents to the surety a claim for the performance of the obligation assumed; the surety may either perform it or invoke the above grounds for release. The second is the stage of the court: in the case of unfounded refusal the creditor brings an action against the surety.
In the judicial stage three questions are central: does a contract of suretyship exist and operate, and does it cover the specific obligation whose performance the creditor demands; are we in the regime of joint and several liability in the case of several sureties; and does the surety have a lawful ground for release. The prior assessment of each of them determines the strategy of the action and the exact construction of the claim.
Frequently Asked Questions
Can suretyship cover a future obligation?
Yes. Under Article 891, suretyship applies also to future and conditional obligations.
How do several sureties answer?
Under Article 896, several sureties for one and the same obligation answer as joint and several debtors, even where they have not jointly assumed the suretyship.
When is the surety released?
Under Article 904 — on substantial deterioration of the principal debtor’s financial condition, substantial difficulty of recourse, or the creditor’s possession of a document with an enforcement clause.
What may the debtor do in the surety’s defence?
Before the term falls due, the debtor may provide the surety with security instead of release.
How We Help on Legal.ge
On Legal.ge we assist in the full cycle of guarantee enforcement: we will examine the contract of suretyship and its scope, draft the claim against the surety, analyse the prospects of joint and several liability and of the grounds for release, and defend your interests in court. Contact our team before declaring the claim.