In doing business, it is often required that an individual be required to stand surety for another’s debt obligations. What this means is that if one person fails to pay an amount, the surety will be required to pay it. Examples might include:
- A lease agreement in instances where the lessee cannot afford to pay the rent, the lessor can call on the surety to pay such rent;
- If a customer signs a credit agreement with a supply shop for goods to be provided on a 30 day payment account. If the customer cannot settle the account within 30 days, the store owner can call on the surety to settle the debt rather.
To create a suretyship arrangement, a written Suretyship Agreement is necessary.