§ 3714. Obligations which need not be in writing A promise to answer for the obligation of another, in any of the following cases, is deemed an original obligation of the promisor, and need not be in writing: (1) where the promise is made by one who has received property of another upon an undertaking to apply it pursuant to the promise, or by one who has received a discharge from an obligation in whole or in part in consideration of the promise; (2) where the creditor parts with value, or enters into an obligation, in consideration of the obligation in respect to which the promise is made, in terms or under circumstances such as to render the party making the promise the principal debtor, and the person in whose behalf it is made, his surety; (3) where the promise, being for an antecedent obligation of another, is made upon the consideration that the party receiving it cancels the antecedent obligation, accepting the new promise as a substitute therefor; or upon the consideration that the party receiving it releases the property of another from a levy, or his person from imprisonment under an execution on a judgment obtained upon the antecedent obligation; (4) where the promise is upon a consideration beneficial to the promisor, whether moving from either party to the antecedent obligation or from another person; (5) where a factor undertakes, for a commission, to sell merchandise and guarantee the sale; or (6) where the holder of an instrument for the payment of money, upon which a third person is or may become liable to him, transfers it in payment of a precedent debt of his own, or for a new consideration, and in connection with such transfer enters into a promise respecting such instrument. § 3715. Acceptance of guaranty; notice A mere offer to guarantee is not binding until notice of its acceptance is communicated by the guarantee to the guarantor; but an absolute guaranty is binding upon the guarantor without notice of acceptance. Subchapter III-Interpretation of Guaranty § 3731. Guaranty of incomplete contract In a guaranty of a contract, the terms of which are not then settled, it is implied that its terms shall be such as will not expose the guarantor to greater risks than he would incur under those terms which are most common in similar contracts at the place where the principal contract is to be performed. § 3732. Guaranty that an obligation is good or collectible A guaranty to the effect that an obligation is good, or is collectible, imports that the debtor is solvent and that the demand is collectible by the usual legal proceedings, if taken with reasonable diligence. § 3733. Same; recovery A guaranty, such as is provided by section 3732 of this title, is not discharged by an omission to take proceedings upon the principal debt, or upon any collateral security for its payment, if no part of the debt could have been collected thereby. 8 3734. Same; guarantor's liability In the cases provided by section 3733 of this title, the removal of the principal from the Canal Zone, leaving no property therein from which the obligation might be satisfied, is equivalent to the insol vency of the principal in its effect upon the rights and obligations of the guarantor. Subchapter IV-Liability of Guarantors § 3751. Conditional and unconditional guaranties A guaranty is to be deemed unconditional unless its terms import some condition precedent to the liability of the guarantor. § 3752. Liability of guarantor of payment or performance A guarantor of payment or performance is liable to the guarantee immediately upon the default of the principal, and without demand or notice. 83753. Liability of guarantor of conditional obligation Where one guarantees a conditional obligation, his liability is commensurate with that of the principal, and he is not entitled to notice of the default of the principal, unless he is unable, by the exercise of reasonable diligence, to acquire information of the default, and the creditor has actual notice thereof. § 3754. Guarantor's obligation commensurate with that of principal The obligation of a guarantor must be neither larger in amount nor in other respects more burdensome than that of the principal; and if in its terms it exceeds it, it is reducible in proportion to the principal obligation. § 3755. Illegal contract or personal disability of principal A guarantor is not liable if the contract of the principal is unlawful; but he is liable notwithstanding any mere personal disability of the principal, though the disability be such as to make the contract void against the principal. Subchapter V-Continuing Guaranty § 3771. Definition of continuing guaranty A guaranty relating to a future liability of the principal, under successive transactions, which either continue his liability or from time to time renew it after it has been satisfied, is called a continuing guaranty. § 3772. Revocation A continuing guaranty may be revoked at any time by the guarantor, in respect to future transactions, unless there is a continuing consideration as to the transactions which he does not renounce. Subchapter VI-Exoneration of Guarantors § 3791. Alteration of original obligation; suspension of remedies or rights A guarantor is exonerated, except so far as he may be indemnified by the principal, if, by any act of the creditor, without the consent of the guarantor, the original obligation of the principal is altered in any respect, or the remedies or rights of the creditor against the principal, in respect thereto, are in any way impaired or suspended. § 3792. Void promises A promise by a creditor, which for any cause is void, or voidable by him at his option, does not alter the obligation or suspend or impair the remedy, within the meaning of section 3791 of this title. § 3793. Rescission of agreement altering obligation or impairing remedy The rescission of an agreement altering the original obligation of a debtor, or impairing the remedy of a creditor, does not restore the liability of a guarantor who has been exonerated by the agreement. § 3794. Partial satisfaction of obligation The acceptance, by a creditor, of anything in partial satisfaction of an obligation, reduces the obligation of a guarantor thereof, in the same measure as that of the principal, but does not otherwise affect it. § 3795. Delay in proceeding by creditor Mere delay on the part of a creditor to proceed against the principal, or to enforce any other remedy, does not exonerate a guarantor. § 3796. Liability of indemnified guarantor notwithstanding modification or release A guarantor who has been indemnified by the principal is liable to the creditor to the extent of the indemnity, notwithstanding that the creditor, without the assent of the guarantor, may have modified the contract or released the principal. § 3797. Effect of discharge of principal A guarantor is not exonerated by the discharge of his principal by operation of law, without the intervention or omission of the creditor. 3851. Limit of surety's obligation. 3852. Rules of interpretation. 3853. Effect of judgment against surety. 3854. Exoneration by performance or offer of performance. 3855. Discharge by certain acts of creditor. SUBCHAPTER III-RIGHTS OF SURETIES 3871. Surety has rights of guarantor. 3872. Pursuit of certain remedies by creditor; exoneration of surety for neglect. 3873. Compelling principal to perform. 3874. Reimbursement of surety by principal. 3875. Subrogation to creditor's rights; contribution from cosureties. 3876. Entitlement to benefits of securities held by creditor. 3877. Property of principal to be applied first. SUBCHAPTER IV-RIGHTS OF CREDITORS 3901. Entitlement to benefits of securities held by surety. SUBCHAPTER V-LETTER OF CREDIT 3921. Definition of letter of credit. 3922. How addressed. 3923. Liability of the writer. 3924. General or special letters of credit. 3925. Nature and effect of general letter of credit. 3926. Extent of general letter of credit. 3927. Letter as continuing guaranty in certain cases. 3928. Notice to writer of letter. 3929. Agreement of credit with terms of letter. Subchapter I-General Provisions §3831. Definition of surety A surety is one who at the request of another, and for the purpose of securing a benefit to him, becomes responsible for the performance by the latter of some act in favor of a third person, or hypothecates property as security therefor. § 3832. Apparent principal may show that he is surety One who appears to be a principal, whether by the terms of a written instrument or otherwise, may show that he is in fact a surety, except as against persons who have acted on the faith of his apparent character of principal. Subchapter II-Liability of Sureties § 3851. Limit of surety's obligation A surety cannot be held beyond the express terms of his contract, and if the contract prescribes a penalty for its breach, he is not in any case liable for more than the penalty. § 3852. Rules of interpretation In interpreting the terms of a contract of suretyship, the same rules are to be observed as in the case of other contracts. § 3853. Effect of judgment against surety Notwithstanding the recovery of judgment by a creditor against a surety, the latter still occupies the relation of surety. § 3854. Exoneration by performance or offer of performance Performance of the principal obligation, or an offer of performance, duly made as provided in this title, exonerates a surety. § 3855. Discharge by certain acts of creditor A surety is exonerated: (1) in like manner with a guarantor; (2) to the extent to which he is prejudiced by any act of the creditor which would naturally prove injurious to the remedies of the surety or inconsistent with his rights, or which lessens his security; or (3) to the extent to which he is prejudiced by an omission of the creditor to do anything, when required by the surety, which it is his duty to do. Subchapter III-Rights of Sureties § 3871. Surety has rights of guarantor A surety has all the rights of a guarantor, whether he becomes personally responsible or not. § 3872. Pursuit of certain remedies by creditor; exoneration of surety for neglect A surety may require his creditor to proceed against the principal, or to pursue any other remedy in his power which the surety cannot himself pursue, and which would lighten his burden; and if in such case the creditor neglects to do so, the surety is exonerated to the extent to which he is thereby prejudiced. § 3873. Compelling principal to perform A surety may compel his principal to perform the obligation when due. 83874. Reimbursement of surety by principal If a surety satisfies the principal obligation, or any part thereof, whether with or without legal proceedings, the principal shall reimburse what the surety has disbursed, including necessary costs and expenses; but the surety has no claim for reimbursement against other persons, though they may have been benefited by his act, except as prescribed by section 3875 of this title. § 3875. Subrogation to creditor's rights; contribution from cosureties A surety, upon satisfying the obligation of the principal, may enforce every remedy which the creditor then has against the principal to the extent of reimbursing what he has expended, and may require all his cosureties to contribute thereto, without regard to the order of time in which they become cosureties. § 3876. Entitlement to benefits of securities held by creditor A surety is entitled to the benefit of every security for the performance of the principal obligation held by the creditor, or by a cosurety at the time of entering into the contract of suretyship, or acquired by him afterward, whether the surety was aware of the security or not. § 3877. Property of principal to be applied first Whenever property of a surety is hypothecated with property of the principal, the surety may have the property of the principal first applied to the discharge of the obligation. Subchapter IV-Rights of Creditors § 3901. Entitlement to benefits of securities held by surety A creditor is entitled to the benefit of everything which a surety has received from the debtor by way of security for the performance of the obligation, and may, upon maturity of the obligation, compel the application of the security to its satisfaction. Subchapter V-Letter of Credit § 3921. Definition of letter of credit A letter of credit is a written instrument, addressed by one person to another, requesting the latter to give credit to the person in whose favor it is drawn. § 3922. How addressed A letter of credit may be addressed to several persons in succession. § 3923. Liability of the writer The writer of a letter of credit is, upon the default of the debtor, liable to those who gave credit in compliance with its terms. § 3924. General or special letters of credit A letter of credit is either general or special. When the request for credit in a letter is addressed to specified persons by name or description, the letter is special. All other letters of credit are general. § 3925. Nature and effect of general letter of credit A general letter of credit gives any person to whom it may be shown authority to comply with its request, and by his so doing it becomes, as to him, of the same effect as if addressed to him by name. § 3926. Extent of general letter of credit Several persons may successively give credit upon a general letter. |