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I. OVERVIEW A. A surety or a guarantor is a person who GUARANTEES the performance of someone else (the obligor). 1 . a SURETY has primary liability , i.e., their liability is THE SAME as the original obligor’s and they are liable even w/out notice of default . 2. a GUARANTOR has secondary liability, i.e. their liability does not attach until after the obligee/creditor has exhausted all remedies against the original obligor/debtor. A GUARANTOR is entitled to notice of obligor’s default before liability attached. 3. For CPA exam purposes always assume that the person “guaranteeing” performance is a SURETY unless the precise word GUARANTOR is used. B. The performance may be a debt or involve the posting of a bond . C. A suretyship agreement is contractual in nature. (See below). D. A suretyship relationship involves THREE parties: 1. OBLIGEE/CREDITOR: party to whom the obligation is owed. 2. OBLIGOR/PRINCIPAL DEBTOR: the person who has the ultimate responsibility to perform( to both the obligee and surety.) 3. SURETY/GUARANTOR: promises to the OBLIGEE/ CREDITOR that they will be liable for the performance of the OBLIGOR/DEBTOR . II.
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