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 Contracts There is a very simple rule of guarantees. If you sign a valid guarantee agreement, i.e., you agree to pay if another person does not, you are liable to pay the debt, in the same manner as the person who signed the note. Most guarantees do not require the person to proceed against the person on the contract first. Thus, one who is owed money can pick and choose whom to sue, and they can sue the guarantor first in the event of a breach, or non-payment. It is extremely important to avoid the temptation to sign a guarantee for another person. If you have to, it is wise to consult an attorney, prior to signing. The attorney may be able to negotiate a limited guarantee or may even convince the other side to agree to no guarantee at all. In the event that you have no choice but to guarantee a debt, be sure to request that notice of default be directed to you, so that you can at least know that a person has not made a payment on the debt. Then you can make any payments in default and, at the very least, protect your credit rating. The easiest way to remember your rights with respect to a co-signer or guarantor, for a contractual obligation, such as a promissory note, is to remember just that - you are guaranteeing to pay the full amount, if the other person stops paying. This obligation requires extreme care on the part of the co-signer or guarantor. The guarantor should be certain that (1) they can repay the obligation if the other person cannot; (2) they trust the original signer enough to pay the obligation; (3) they set up procedures whereby they receive notice of any non-payment or delinquent payments; and (4) they understand there may be some liability attached to the co-signer depending upon the use of the product by the original signer. It should be noted that any agreement between the signer and co-signer will not alter the fact that the co-signer is as liable under the obligation as the signer. Further, the lender is not obligated to pursue the original signer first. They may be able to pursue the co-signer directly, first, as soon as there is a delinquent payment, or non-payment. Of course, as a co-signer, you can sue the original signer who did not pay, for any sums which you were required to pay to others on behalf of the original signer. However, remember that the reason for requiring a co-signer in the first place was because there was some possibility that the original signer could not, or would not, pay. If the original signer cannot pay or declares bankruptcy, you will be left being forced to pay on the obligation, in full, and having no remedy against the original signer.
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