SLIDE3

ACCORDING TO ARTICLE 2047 PARAGRAPH 1 BY GUARANTY A PERSON, CALLED THE GUARANTOR, BINDS HIMSELF
TO THE CREDITOR TO FULFILL THE OBLIGATION OF THE PRINCIPAL
DEBTOR IN CASE THE LATTER SHOULD FAIL TO DO SO.
SLIDE 4
1.
2.

3.

4.

5.
6.
7.

8.
9.

ACCESSORY - BECAUSE IT IS DEPENDENT FOR ITS EXISTENCE UPON

THE PRINCIPAL OBLIGATION GUARANTEED BY IT
SUBSIDIARY AND CONDITIONAL - BECAUSE IT TAKES EFFECT ONLY
WHEN THE PRINCIPAL DEBTOR FAILS IN HIS OBLIGATION SUBJECT TO A
LIMITATION
UNILATERAL - (A) IT GIVES RISE ONLY TO A DUTY ON THE PART OF THE
GUARANTOR IN RELATION TO THE CREDITOR AND NOT VICE VERSA
ALTHOUGH AFTER ITS FULFILLMENT, THE PRINCIPAL DEBTOR BECOMES
LIABLE TO INDEMNIFY THE GUARANTOR1 (ART. 2066.) BUT THIS IS
MERELY AN INCIDENT OF THE CONTRACT; AND ALSO BECAUSE IT MAY
BE ENTERED INTO EVEN WITHOUT THE INTERVENTION OF THE
PRINCIPAL DEBTOR (ART. 2050.)
BECAUSE A PERSON CANNOT BE THE PERSONAL GUARANTOR OF
HIMSELF. A PERSON CANNOT BE BOTH THE PRIMARY DEBTOR AND THE
GUARANTOR OF HIS OWN DEBT AS THIS IS INCONSISTENT WITH THE
VERY PURPOSE OF A GUARANTEE WHICH IS FOR THE CREDITOR TO
PROCEED AGAINST A THIRD PERSON IF THE DEBTOR DEFAULTS IN HIS
OBLIGATION.
NOMINATE
CONSENSUAL
THE CONTRACT EXISTS FOR THE BENEFIT OF THE CREDITOR NOT FOR
THE BENEFIT OF THE PRINCIPAL DEBTOR WHO IS NOT A PARTY TO THE
CONTRACT OF GUARANTY. PARTIES WILL BE TACKLED LATER BY MY
GROUP MATE.
FALLS UNDER THE STATUTE OF FRAUDS
GRATUITOUS
THESE TWO WILL BE DISCUSSED IN THE LATTER PART OF THE
DISCUSSION
SLIDE 5

PERSONAL GUARANTY - THIS IS THE SO-CALLED GUARANTY PROPERLY

OR GUARANTEE IN THE STRICT SENSE. THE GUARANTEE IS THE CREDIT
GIVEN BY THE PERSON WHO GUARANTEES THE FULFILLMENT OF THE
PRINCIPAL OBLIGATION
SLIDE 8
A) CONVENTIONAL. ONE CONSTITUTED BY AGREEMENT OF THE
PARTIES (ART. 2051, PAR. 1.);
(B) LEGAL. ONE IMPOSED BY VIRTUE OF A PROVISION OF LAW
(IBID.); OR
(C) JUDICIAL. ONE REQUIRED BY A COURT TO GUARANTEE THE
EVENTUAL RIGHT OF ONE OF THE PARTIES IN A CASE. (IBID.)

(A) GRATUITOUS. ONE WHERE THE GUARANTOR DOES

NOT RECEIVE ANY PRICE OR REMUNERATION FOR
ACTING AS SUCH (ART. 2048.); OR
(B) ONEROUS. ONE WHERE THE GUARANTOR RECEIVES VALUABLE
CONSIDERATION FOR HIS GUARANTY. (IBID.)

SLIDE 9

(A) SINGLE. ONE CONSTITUTED SOLELY TO GUARANTEE OR SECURE

PERFORMANCE BY THE DEBTOR OF THE PRINCIPAL OBLIGATION (ART.
2051, PAR. 2.); OR
(B) DOUBLE OR SUB-GUARANTY. ONE CONSTITUTED TO SECURE THE
FULFILLMENT BY THE GUARANTOR OF A PRIOR GUARANTY. (IBID.)

DEFINITE. ONE WHERE THE GUARANTY IS LIMITED TO THE PRINCIPAL

OBLIGATION ONLY, OR TO A SPECIFIC PORTION THEREOF (ART. 2055,

PAR. 2.);

(B) INDEFINITE OR SIMPLE. ONE WHERE THE GUARANTY INCLUDES

NOT ONLY THE PRINCIPAL OBLIGATION BUT ALSO ALL ITS ACCESSORIES
(E.G., INTERESTS) INCLUDING JUDICIAL COSTS. (IBID.)

SLIDE 10

A GUARANTOR, ON THE OTHER HAND, DOES NOT

CONTRACT THAT THE PRINCIPAL WILL PAY, BUT SIMPLY
THAT HE IS ABLE TO DO SO.
SLIDE 12

PRESENCE OF CAUSE WHICH SUPPORTS PRINCIPAL

OBLIGATION.
THE CAUSE OF THE CONTRACT IS THE SAME CAUSE
WHICH SUPPORTS THE OBLIGATION AS TO THE PRINCIPAL
DEBTOR. IT IS NOT NECESSARY TO PROVE ANY CONSIDERATION AS
BETWEEN THE GUARANTOR OR SURETY AND THE CREDITOR. THE
CONSIDERATION WHICH SUPPORTS THE OBLIGATION AS TO THE
PRINCIPAL DEBTOR IS A SUFFICIENT CONSIDERATION TO SUPPORT THE
OBLIGATION OF A GUARANTOR OR SURETY. (PYLE VS. JOHNSON, 9 PHIL.
249 [1907]; PHIL. GUARANTY CO. VS. DINIO, 102 PHIL. 991 [1958].)

ABSENCE OF DIRECT CONSIDERATION OR BENEFIT TO

GUARANTOR. THE PECULIAR NATURE OF A GUARANTY OR
SURETY AGREEMENT IS THAT IT IS REGARDED AS VALID DESPITE THE
ABSENCE OF ANY DIRECT CONSIDERATION RECEIVED BY THE
GUARANTOR OR SURETY EITHER FROM THE PRINCIPAL DEBTOR OR
FROM THE CREDITOR. WHILE A CONTRACT OF GUARANTY OR SURETY,

LIKE ANY OTHER CONTRACT, MUST GENERALLY BE SUPPORTED BY A

SUFFICIENT CONSIDERATION, SUCH CONSIDERATION NEED NOT PASS
DIRECTLY TO THE GUARANTOR OR SURETY; A CONSIDERATION MOVING
TO THE PRINCIPAL ALONE WILL SUFFICE. FOR A GUARANTOR OR
SURETY IS BOUND BY THE SAME CONSIDERATION THAT MAKES THE
CONTRACT EFFECTIVE BETWEEN THE PRINCIPAL PARTIES THERETO.
(RIZAL COMMERCIAL BANKING CORP. VS. ARRO, 115 SCRA 777 [1982].)

ABSENCE OF DIRECT OR PERSONAL INTEREST OF GUARANTOR OVER

THE OBLIGATION
THE GUARANTOR OR SURETY, THEREFORE, BECOMES LIABLE FOR THE
DEBT OR DUTY OF ANOTHER ALTHOUGH HE POSSESSES NO DIRECT OR
PERSONAL INTEREST OVER THE OBLIGATION NOR DOES HE RECEIVE
ANY BENEFIT THERE- FROM. (GARCIA, JR. VS. COURT OF APPEALS, 191
SCRA 493 [1990].) IT IS NEVER NECESSARY THAT HE SHOULD RECEIVE
ANY PART OR BENEFIT, IF SUCH THERE BE, ACCRUING TO THE
PRINCIPAL. (WILLEX PLASTIC INDUSTRIES CORP. VS. COURT OF
APPEALS, 256 SCRA 478 [1996].)

SLIDE 13

GUARANTY IS UNILATERAL. IT EXISTS FOR THE BENEFIT

OF THE CREDITOR AND NOT FOR THE BENEFIT OF THE
PRINCIPAL DEBTOR WHO IS NOT A PARTY TO THE
CONTRACT OF GUARANTY.
SLIDE 15
ONE CONSTITUTED TO GUARANTEE THE OBLIGATION OF
A GUARANTOR
SLIDE 16

T IS AN INDISPENSABLE CONDITION FOR ITS EXISTENCE

THAT THERE MUST BE A PRINCIPAL OBLIGATION. SO, IF
THE PRINCIPAL OBLIGATION IS VOID IT IS ALSO VOID.
SLIDE 17
IT CANNOT BE PRESUMED BECAUSE OF THE EXISTENCE
OF A CONTRACT OR PRINCIPAL OBLIGATION.
SLIDE 18

A CONTRACT OF GUARANTY (NOT SURETYSHIP) FALLS UNDER THE

STATUTE OF FRAUDS SINCE IT IS A SPECIAL PROMISE TO ANSWER FOR
THE DEBT, DEFAULT OR MISCARRIAGE OF ANOTHER.
IT SHALL BE UNENFORCEABLE BY ACTION, UNLESS THE SAME OR
SOME NOTE OR MEMORANDUM THEREOF BE IN WRITING, AND
SUBSCRIBED BY THE PARTY CHARGED, OR BY HIS AGENT; EVIDENCE,
THEREFORE, OF THE AGREEMENT CANNOT BE RECEIVED WITHOUT THE
WRITING, OR A SECONDARY EVIDENCE OF ITS CONTENTS. (ART.
1403[2, A]; MACONDRAY & CO., INC. VS. PION, 2 SCRA 1109 [1962].)
UNDER ARTICLE 1358 OF THE CIVIL CODE, A CONTRACT OF GUARANTY
NEED NOT APPEAR IN A PUBLIC DOCUMENT TO BE VALID OR
ENFORCEABLE.
EXAMPLES

1.

IFTHESURETYMAKESHIMSELFLIABLEONLYIFTHECREDITOR
INFORMSHIMOFTHEDEBTORSDEFAULTWITHINA
CERTAIN PERIOD, AND NOTIFICATION IS NOT DONE, THE SURETY IS
NOT LIABLE. (SANTOS V. MEJIA, 94 PHIL. 211).

IF A SURETY GUARANTEES THAT THE DEBTOR WILL RENDER AN

ACCOUNTING, AND THE DEBTOR REALLY DOES SO, BUT DOES NOT
DELIVER THE MONEY SUPPOSED TO BE GIVEN TO THE CREDITOR, THE
SURETY IS NOT LIABLE FOR HE DID NOT GUARANTEE THE DE- LIVERY
OF THE MONEY. (UY ALOO V. CHO JAN LING, 27 PHIL. 247).
IF A SURETY GUARANTEES A DELIVERY OF A FIREARM UPON DEMAND, HE DOES NOT NECESSARILY GURANTEE THAT THE FIREARM
WILL BE PRODUCED FOR INSPECTION. (GOVT. V. HERRERO, 38 PHIL.
410).
A SURETY IS LIABLE ONLY FOR THE OBLIGATIONS OF THE DEBTOR
STIPULATED UPON, NOT FOR PRIOR OBLIGATIONS, UNLESS THIS
RETROACTIVE EFFECT HAD BEEN CLEARLY AGREED UPON. (BANK OF
THE PHIL. ISLANDS V. FORESTER, 49 PHIL. 843).
IF A SURETY BINDS ITSELF ONLY FOR A LIMITED PERIOD, IT CAN NOT BE
HELD LIABLE GENERALLY BEYOND SAID TIME LIMIT. (SANTOS V. MEDIA,
94 PHIL. 211).
A GUARANTOR IS NOT LIABLE FOR PAST DEFAULTS OF THE DEBTOR.
REASON: A GUARANTY HAS ONLY A PROSPECTIVE, NOT RETROACTIVE
EFFECT, UNLESS THE CONTRACT CLEARLY INDICATES A CONTRARY
INTENT. (BUENO CONTRA AMBROSIO, 87 PHIL. 225). THUS, ALSO, A
GUARANTY GENERALLY SECURES ONLY THE DEBTS CON- TRACTED
AFTER THE GUARANTY TAKES EFFECT. (EL VENCEDOR V. CANLAS, 44
PHIL. 699). THIS IS A CONSEQUENCE OF THE STATUTORY DIRECTIVE
THAT A GUARANTY IS NOT PRESUMED, BUT MUST BE EXPRESS AND
CANNOT EXTEND TO MORE THAN WHAT IS STIPULATED. (SEE TRADERS
INSURANCE & SURETY CO., INC. V. DY ENG GIOK, L-9073, NOV. 17,
1958).

SLIDE 20
(1) WHERE GUARANTY DEFINITE.

THUS, IF THE AMOUNT TO BE PAID OR THE SERVICE TO BE

PERFORMED BY THE PERSON GUARANTEED IS SPECIFIED
IN A CONTRACT OF GUARANTY, THEN THE OBLIGATION
OF THE GUARANTOR EXTENDS NO FURTHER THAN THE

SUM OR SERVICES SO SPECIFIED, AND EXTRINSIC FACTS

CANNOT BE RESORTED TO FOR THE PURPOSE OF
ENLARGING THE LIMIT IF THE GUARANTOR WAS
IGNORANT OF SUCH FACTS.

SLIDE 21

WHERE GUARANTY INDEFINITE OR SIMPLE.

IF THE TERMS OF THE CONTRACT OF GUARANTY ARE

GENERAL AND INDEFINITE AND DO NOT SPECIFY IN
CLEAR AND EXPRESS MANNER THAT THE LIABILITY OF
THE GUARANTOR IS LIMITED TO THE PRINCIPAL
OBLIGATION, IN WHOLE OR IN PART, IT EXTENDS NOT
ONLY TO THE SAID PRINCIPAL OBLIGATION BUT ALSO TO
ALL ITS ACCESSORIES, THEY BEING COMPREHENDED
WITHIN THE PRINCIPAL BECAUSE THE GUARANTY HAS
SECURED IT WITH ALL ITS CONSEQUENCES.
SLIDE 22

THIS LIMITATION IS JUST BECAUSE A GUARANTOR AS SUCH SHOULD

NOT BE MADE RESPONSIBLE FOR WHATEVER COSTS THE DEBTOR
MIGHT HAVE CAPRICIOUSLY OCCASIONED. (11 MANRESA 243-244.)
ON THE OTHER HAND, IT IS WITHIN THE POWER OF THE GUARANTOR
TO RELIEVE HIMSELF FROM RESPONSIBILITY OF RESPONDING FOR
SUCH JUDICIAL COSTS BY MAKING PAYMENT. FROM THE TIME HE HAD
BEEN JUDICIALLY REQUIRED TO PAY, ALL OF THE COSTS THAT ARISE
DEPEND UPON HIS EXCLUSIVE WILL AND ARE, THEREFORE,

ATTRIBUTED TO HIS FAULT IF HE DOES NOT DO SO.

SLIDE 23

(1) WHEN NECESSARY. WHERE THERE IS MERELY AN OFFER OF A

GUARANTY, OR MERELY A CONDITIONAL GUARANTY IN THE SENSE
THAT IT REQUIRES ACTION BY THE CREDITOR BEFORE THE OBLIGATION
BECOMES FIXED, IT DOES NOT BECOME A BINDING OBLIGATION UNTIL
IT IS ACCEPTED AND (UNLESS THERE IS A WAIVER OF NOTICE) UNTIL
NOTICE OF SUCH ACCEPTANCE BY THE CREDITOR IS GIVEN TO, OR
ACQUIRED BY, THE GUARANTOR, OR UNTIL HE HAS NOTICE OR
KNOWLEDGE THAT THE CREDITOR HAS PERFORMED THE CONDITION
AND INTENDS TO ACT UPON THE GUARANTY. (NATIONAL BANK VS.
GARCIA, 47 PHIL. 662 [1925]; 28 C.J. 901; 24 AM. JUR. 899.)
(A) THE ACCEPTANCE NEED NOT NECESSARILY BE EXPRESS OR IN
WRITING, BUT MAY BE INDICATED BY ACTS AMOUNTING TO AN
ACCEPTANCE. (NATIONAL BANK VS. ESCUETA, 50 PHIL. 591 [1927].) IN
OTHER WORDS, THE ACCEPTANCE OF THE GUARANTY BY THE
CREDITOR MAY BE IMPLIED.
(B) THE GUARANTOR IS ENTITLED TO NOTICE IN ORDER THAT, BEING
SECONDARILY LIABLE, HE MAY KNOW THE NATURE AND EXTENT OF HIS
LIABILITY AND HAVE AN OPPORTUNITY OF TAKING INDEMNITY FROM
THE PRINCIPAL OBLIGOR OR OF OTHERWISE SECURING HIMSELF
AGAINST LOSS, AND HAVE A REASONABLE TIME IN WHICH TO
ARRANGE FOR THE NECESSARY FUNDS TO PAY THE AMOUNT OF HIS
GUARANTY, IF THE PRINCIPAL DEFAULTS, AND TO AVAIL HIMSELF OF
THE APPROPRIATE MEANS IN LAW AND EQUITY TO COMPEL THE OTHER
PARTIES TO DISCHARGE HIM FROM FUTURE RESPONSIBILITY. (28 C.J.
900; NATIONAL BANK VS. GARCIA, SUPRA.)

(2) WHEN NOT NECESSARY. WHERE, UPON THE OTHER HAND, THE
TRANSACTION IS NOT MERELY AN OFFER OF GUARANTY, BUT IT
AMOUNTS TO DIRECT OR UNCONDITIONAL PROMISE OF GUARANTY,
UNLESS NOTICE OF ACCEPTANCE IS MADE A CONDITION OF THE
GUARANTY, ALL THAT IS NECESSARY TO MAKE THE PROMISE BINDING
IS THAT THE PROMISEE (CREDITOR) SHOULD ACT UPON IT, AND
NOTICE OF ACCEPTANCE IS NOT NECESSARY THE REASON BEING THAT
THE CONTRACT OF GUARANTY IS UNILATERAL. (TEXAS CO. VS.
ALONSO, 73 PHIL. 90 [1941]; SEE MACONDRAY AND CO., INC. VS.
PION, 2 SCRA 1109 [1962].)
SLIDE 24

(1) SPECIFIED PERSON STIPULATED AS GUARANTOR.

WHERE THE CREDITOR HAS REQUIRED AND STIPULATED
THAT A SPECIFIED PERSON SHOULD BE A GUARANTOR,
THE SUBSTITUTION OF GUARANTOR MAY NOT BE
DEMANDED (ART. 2057.) BECAUSE IN SUCH A CASE, THE
SELECTION OF THE GUARANTOR IS A TERM OR
CONDITION OF THE AGREEMENT AND AS A PARTY, THE
CREDITOR IS, THEREFORE, BOUND THEREBY. (SEE ARTS.
1159, 1306.)
(2) GUARANTOR SELECTED BY THE PRINCIPAL DEBTOR. WHERE THE
GUARANTOR IS SELECTED BY THE PRINCIPAL DEBTOR, THE LATTER
ANSWERS FOR THE INTEGRITY, CAPACITY, AND SOLVENCY OF THE
FORMER BECAUSE THE GUARANTOR MUST POSSESS THE
QUALIFICATIONS PRESCRIBED NOT ONLY AT THE MOMENT THE
GUARANTY IS GIVEN BUT ALSO THEREAFTER, UNTIL THE
EXTINGUISHMENT OF THE DEBT.
(3) GUARANTOR PERSONALLY DESIGNATED BY THE CREDITOR.
WHERE, HOWEVER, THE GUARANTOR IS PERSONALLY DESIGNATED BY
THE CREDITOR, IT IS BECAUSE HE CONSIDERS HIM TO HAVE THE
QUALIFICATIONS FOR THE PURPOSE, AND THE RESPONSIBILITY FOR
THE SELECTION SHOULD, THEREFORE, FALL UPON HIM, AND NOT ON

THE DEBTOR.