39.1

b a c k n e x th o m e

Chapter 39 Objectives State the general nature of contracts of

guaranty or suretyship. Identify ways contracts of guaranty and

suretyship are discharged. Discuss the rights of the parties in a

secured credit sale. Discuss the rights of the seller and

buyer in a secured credit sale.

© 2002 West Educational Publishing To accompany Law for Business, 14e, by Ashcroft and Ashcroft

39.2

b a c k n e x th o m e

Guaranty Guaranty - agreement in which one party

promises to be responsible for debts or obligations of another.

Fidelity bond - contract whereby a person entrusted with money may be required to have someone guarantee faithful performance.

Bonding companies - handle most surety relationships.

Parties involved - guarantor or surety, creditor, and principal.

39.3

b a c k n e x th o m e

Making a Distinction Do contracts of suretyship need to be in

writing? How about contracts of guaranty?

No. Yes. By law, must a creditor notify sureties if

the principal defaults? No. In suretyship, is the surety contractually

obligated to pay the obligation? Yes.

QuickQuiz

QuickQuiz

QuickQuiz

QuickQuiz

39.4

b a c k n e x th o m e

Rights of Suretyand Guarantor

Explain each of the following:

1. Indemnity

4. Exoneration3. Contribution

2. Subrogation

QuickQuiz

QuickQuiz

QuickQuiz

QuickQuiz

39.5

b a c k n e x th o m e

Secured Credit Sales In a secured credit sale, the seller retains

the right to repossess goods upon default. Security agreement describes collateral

and contains terms and names of parties. Rights of the seller may be transferred to a

third person by assignment. Rights of the buyer include transferring

collateral and determining the amount owed.

39.6

b a c k n e x th o m e

Perfection of aSecurity Interest

Explain each of the following: Perfected security interest Inventory Equipment Financing statement Fixtures Consumer goods Repossession Resale

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Let’sDiscuss

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