A guarantor’s obligation is secondary, and the law has developed defences protecting them from changes made without their consent. Commercial guaranties waive most of them.
Classic suretyship defences. Material modification of the underlying obligation; extension of time; release or impairment of collateral; release of the principal obligor; failure to pursue the principal; and lack of notice of default.
Impairment of collateral is the most commercially significant: a lender that releases, mismanages or fails to perfect on collateral may discharge the guarantor to the extent of the impairment.
Waivers. Well-drafted guaranties waive presentment, demand, protest, notice of acceptance and default, the right to require the lender to proceed first against the borrower or the collateral, and defences arising from modification, extension or release. Courts generally enforce these between commercial parties, though some states limit waivers of certain protections.
Absolute and unconditional. Language making the guaranty independent of the underlying obligation strengthens enforcement and supports summary proceedings.
Statute of frauds. A guaranty must be in writing and signed.
Anti-deficiency and one-action rules in some states restrict pursuing a guarantor after a non-judicial foreclosure, and a lender’s sequencing choices can extinguish the guaranty entirely.
Fraudulent transfer risk attaches to upstream and cross-stream guaranties.