Suretyship – Responsibility for Another's Debt?!

Probably everyone has heard at least once about a suretyship agreement and its accompanying consequences. The outcome and/or consequences of a suretyship agreement are negative in most cases. The entire problem and/or the essence of the problem lies precisely in the fact that there is a lack of complete information regarding the suretyship agreement, and/or the person signing it fails to realize the subsequent consequences:

Question 1: What is a suretyship agreement?
Answer: In simple terms, X signs a loan agreement with Y. Y requests a suretyship agreement, and X presents A as the guarantor (surety). In the event that X fails to fulfill the obligation to Y, then Y has the right to demand the payment of the amount from both X and A. There are two types of suretyship agreements; however, in 100 out of 100 cases, I have encountered suretyship involving joint and several liability.

Question 2: Do all the obligations of the debtor extend to the surety?
Answer: If a joint and several suretyship agreement is signed between the parties, then they extend entirely. For example: if X fails to fulfill the obligation, not only will the surety A be required to pay the sum, but enforcement can also be directed against any of A's property (vehicle, bank accounts, apartment, land, etc.). Simply put: the surety is liable with their property for the amount and/or obligation that X undertook to fulfill, despite the fact that A did not receive the fulfillment of this obligation and/or any benefit from it;

Question 3: Is there a limit to the liability in suretyship?
Answer: There is, and it must absolutely be specified in the suretyship agreement. It must be reflected numerically. It is permissible to cover up to an increase in the claim amount, but a special provision must exist here as well. In most cases, the surety's liability is fully tied to the entire obligation of the debtor, i.e., X;

Question 4: Does the suretyship extend to all subsequent agreements?
Answer: It is a complex issue and requires specific answers to specific facts. However, I will explain using an example. Let's say X signed a loan agreement with Y for $10,000 USD on January 1, 2025, and A assumed the suretyship obligation for $10,000 USD. Regardless of whether there is a provision stating that the suretyship also continues for subsequent supplementary agreements, in the event that X and Y sign a supplementary agreement not for $10,000 USD but for $20,000 USD, and Y additionally transfers $10,000 USD to X, the suretyship will not and cannot exist for the full $20,000 USD. Rather, the suretyship will only cover the original $10,000 USD;

Question 5: Is any other transaction executed aside from the suretyship agreement?
Answer: In addition to the suretyship agreement, the law also requires A to submit a statement to Y that they agree to take responsibility for the fulfillment of the obligation by X. The law refers to this as a "written statement." The apparent purpose of the law is that, apart from party A assuming the obligation of performance via the contract without receiving any benefit, A should think once again whether it is worthwhile to take on an obligation where there is no benefit to be gained. In most cases, both the suretyship agreement and/or the written statement are prepared by Y, i.e., the legally stronger party (a bank, microfinance organization, and/or commercial entity);

Question 6: If X fails to fulfill the obligation to Y and A fulfills it, what rights does A have?
Answer: In such a case, A has the full right to demand from X the obligation that A has fulfilled. In a simple example, it looks like this: A paid $10,000 USD to Y on behalf of X, fulfilling the obligation instead of X. A has the right to demand the payment of this $10,000 USD from X. This is known as the right of recourse (subrogation);

Question 7: If a court dispute is ongoing and X either does not participate or submits nothing, what rights does A have?
Answer: A has the right to submit not only their own statement of defense (a procedural term referring to a written opinion submitted by the defendant to the court in response to a lawsuit) but also the statement of defense on behalf of X. This means that they can practically argue not only with their own voice but also on behalf of X, regarding issues such as the execution (or invalidity) of the main contract, the interest rate, the penalty, etc;

Question 8: When does the suretyship agreement terminate?
Answer: A suretyship agreement is an accessory contract, which in simple terms means that a separate suretyship agreement will not and cannot exist without the main contract (in most cases, a loan agreement), and it operates for the duration of that main contract. Therefore, its fate is determined by the other contract to which it is tied;

In practice, there are additionally various other issues. There are challenges, for example, when it is purely a matter of judicial interpretation whether it is a suretyship or a debtor's guarantee. Disputes also arise regarding when the suretyship terminates if the term of the main contract expires and/or is changed without the surety's consent, etc. Consequently, each challenge requires an individual approach. This approach means that you should consult an attorney, and also, before you execute and/or sign a suretyship agreement, think carefully about whether this legal risk is worth it;