ABA Family Legal Guide

Contracts and Consumer Law

Types of Contracts

Leases and Surety Contracts

What are surety contracts?

A surety contract is an agreement in which one party, called the surety, accepts the responsibility for someone else's contractual obligations. For example, you might agree to pay back your son's bank loan if he does not. Usually, a surety is bound with the other person (the principal) on the same promise, often on the same document; under such an arrangement, the surety is sometimes called a cosigner.

A guaranty contract is similar, but with a guaranty the person who's vouching for the principal—called the guarantor—makes a separate promise and is liable only if the principal breaches and it is impossible to collect from him or her. In many cases, the terms "surety" and "guaranty" are used interchangeably, because their practical effects are nearly identical.