Title 56, GUARANTY, SURETYSHIP AND INDEMNITY

A guaranty is a promise to answer for the debt, default, or miscarriage of another person. Source: SDC 1939, § 26.0101.

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. Source: SDC 1939, § 26.0106.

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 con…

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. Source: SDC 1939, § 26.0108.

In the cases mentioned in § 56-1-12 , the removal of the principal from the state, leaving no property therein from which the obligation might be satisfied, is equivalent to the insolvency of the principal in its effect upon the rights and obligations of the guarantor. Source: SD…

A guaranty such as is mentioned in § 56-1-12 is not discharged by any 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. Source: SDC 1939, § 26.0108.

A guaranty is to be deemed unconditional unless its terms import some condition precedent to the liability of the guarantor. Source: SDC 1939, § 26.0109.

A guarantor of payment or performance is liable to the guarantee immediately upon the default of the principal and without demand or notice. Source: SDC 1939, § 26.0110.

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 such default, and the c…

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. Source: SDC 1939, § 26.0112.

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. Source: SDC 1939, § 26.0113.

A person may become guarantor even without the knowledge or consent of the principal. Source: SDC 1939, § 26.0102.

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. Source: SDC 1939, § 26.0114.

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 such transactions which he does not renounce. Source: SDC 1939, § 26.0115.

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 principa…

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 § 56-1-22 . Source: SDC 1939, § 26.0117.

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 such agreement. Source: SDC 1939, § 26.0118.

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. Source: SDC 1939, § 26.0119.

Mere delay on the part of a creditor to proceed against the principal or to enforce any other remedy does not exonerate a guarantor. Source: SDC 1939, § 26.0120.

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. Source: SDC 1939, § 26.0121.

A guarantor is not exonerated by the discharge of his principal by operation of law without the intervention or omission of the creditor. Source: SDC 1939, § 26.0122.

Where a guaranty is entered into at the same time with the original obligation or with the acceptance of the latter by the guarantee and forms, with that obligation, a part of the consideration to him, no other consideration need exist. In all other cases there must be a consider…

Except as prescribed by §§ 56-1-5 to 56-1-9 , inclusive, a guaranty must be in writing and signed by the guarantor; but the writing need not express a consideration. Source: SDC 1939, § 26.0104.

A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where the promise is made by one who has received property of another upon an undertaking to apply it pursuant to such promise, or by one who has received…

A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing 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 …

A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where the promise, being for an antecedent obligation of another, is made upon the consideration that the party receiving it cancels the antecedent obliga…

A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where a factor undertakes, for a commission, to sell merchandise and guarantee the sale. Source: SDC 1939, § 26.0105 (4).

A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing 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 precede…

Suretyship is a contract by which one who at the request of another and for the purpose of securing to him a benefit becomes responsible for the performance by the latter of some act in favor of a third person or hypothecates property as security therefor. Source: SDC 1939, § 26.…

A surety is exonerated 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. Source: SDC 1939, § 26.0205 (3).

A surety is exonerated 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. Source: SDC 1939, § 26.0205 (4).

A surety cannot be held beyond the express terms of his contract, and if such contract prescribes a penalty for its breach, he cannot in any case be liable for more than the penalty. Source: SDC 1939, § 26.0202.

Notwithstanding the recovery of a judgment by a creditor against a surety, the latter still occupies the relation of surety. Source: SDC 1939, § 26.0204.

If a surety satisfies the principal obligation or any part thereof, whether with or without legal proceedings, the principal is bound to reimburse what he has disbursed including necessary costs and expenses, but the surety has no claim for reimbursement against other persons, th…

If the duty of the principal to the creditor is fully satisfied, the surety, to the extent that he has contributed to this satisfaction, is subrogated to all of the following: (1) The rights of the creditor against the principal; (2) Subject to the rule stated in subdivision (4) …

One who appears to be a principal whether by 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. Source: SDC 1939, § 26.0203.

It shall be lawful for any party of whom a bond, undertaking or other obligation is required, to agree with his surety or sureties for the deposit of any or all moneys and assets for which he and his surety or sureties are or may be held responsible, with a bank, savings bank, sa…

A surety has all the rights of a guarantor whether he becomes personally responsible or not. Source: SDC 1939, § 26.0206.

A surety may compel his principal to perform the obligation when due. Source: SDC 1939, § 26.0208.

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 w…

Whenever property of a surety is hypothecated with the property of the principal, the surety is entitled to have the property of the principal first applied to the discharge of the obligation. Source: SDC 1939, § 26.0212.

A surety is exonerated in like manner with the guarantor. Source: SDC 1939, § 26.0205 (1).

A surety is exonerated by performance of the principal obligation or tender of such performance duly made as provided in this code. Source: SDC 1939, § 26.0205 (2).

Indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person. Source: SDC 1939, § 31.3101; repealed SL 1966, ch 111 , § 5; re-enacted SL 1967, ch 235 , § 1.

Unless a contrary intention appears, an indemnity against claims or demands, or liability, expressly, or in other equivalent terms, embraces the costs of defense against such claims, demands, or liability incurred in good faith, and in the exercise of reasonable discretion. Sourc…

Unless a contrary intention appears, the person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity; but the person indemnified has the right to conduct such d…

If, after request, the person indemnifying neglects to defend the person indemnified, unless a contrary intention appears, a recovery against the latter suffered by him in good faith, is conclusive in his favor against the former. Source: SDC 1939, § 31.3107 (5); repealed SL 1966…

If the person indemnifying, whether he is a principal or a surety in the agreement, has not reasonable notice of the action or proceeding against the person indemnified, or is not allowed to control its defense, judgment against the latter is only presumptive evidence against the…

A stipulation that a judgment against the person indemnified shall be conclusive upon the person indemnifying, is inapplicable, unless a contrary intention appears, if the person indemnified had a good defense upon the merits, which, by want of ordinary care, he failed to establi…

Where one, at the request of another, engages to answer in damages whether liquidated or unliquidated, for any violation of duty on the part of the latter, he is entitled to be reimbursed in the same manner as a surety for whatever he may pay. Source: SDC 1939, § 31.3108; repeale…