Suretyship is one of the personal securities regulated by the Code of Obligations (6098). Suretyships are a kind of security commonly used in loan transactions which provide personal security to lenders if a borrower fails to fulfil its payment obligation.
Article 583 of the code sets out certain requirements regarding the validity of suretyship agreements. This article examines these requirements in detail.
Suretyship agreements must be made in writing as per Article 583/1 of the Code of Obligations. This is a condition of validity and not of proof.
Since there must be a written agreement, a suretyship agreement will include the surety’s signature as a condition of validity. On the other hand, a suretyship agreement, by definition, is a gratuitous contract. Although it imposes certain secondary liabilities on creditors, they are not obliged to fulfil any counter-obligations. In this regard, the surety’s declaration of intent (ie, their signature) is considered sufficient for the validity of a surety agreement.
Date of suretyship agreement
The date of a suretyship agreement was not included as a condition under the previous Law of Obligations 818; however, under the Code of Obligations, suretyship agreements must include a date of surety handwritten by the surety. Failure to do so will result in the surety being null and void. This condition aims to prevent creditors from dating the surety in a way that is disadvantageous to the surety provider.
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