A guaranty is a contract under which one person agrees to pay a debt or perform a duty if the other person who is bound to pay the debt or perform the duty fails to do so. A guaranty of the payment of a debt is different from a guaranty of the collection of the debt. A guaranty of payment is absolute while a guaranty of collection is conditional.
The South Carolina Guaranty of Collection of Promissory Note is a legal document that acts as a security measure for lenders when they provide loans or credit on the basis of a promissory note. This type of guaranty provides an additional level of protection for lenders by allowing them to seek payment directly from the guarantor in case the borrower fails to repay the loan. In South Carolina, there are two main types of Guaranty of Collection of Promissory Note: limited and unlimited guaranties. Understanding the differences between these two types is crucial for both lenders and guarantors. 1. Limited Guaranty: This type of guaranty limits the liability of the guarantor by specifying a maximum amount that the guarantor will be responsible for in case of default or non-payment by the borrower. It provides a measure of protection for guarantors by capping their financial obligations, ensuring they are not held accountable for more than the agreed-upon amount. 2. Unlimited Guaranty: Unlike the limited guaranty, the unlimited guaranty holds the guarantor fully responsible for the entire debt owed by the borrower. In this case, there is no predetermined limit on the guarantor's liability, meaning the guarantor can be pursued for the full amount owed, including any accrued interest or additional costs. Lenders often opt for unlimited guaranties to increase their chances of recovering the full loan amount. When drafting a South Carolina Guaranty of Collection of Promissory Note, it is essential to include specific clauses and details to ensure the document is legally enforceable. Some relevant keywords and sections to include are: 1. Parties: Clearly identify and provide details about the lender, borrower, and guarantor involved in the loan agreement. 2. Terms and Conditions: Outline the terms and conditions of the promissory note, including the loan amount, interest rate, repayment schedule, and any other relevant financial considerations. 3. Guarantor's Obligations: Define the guarantor's responsibilities, such as guaranteeing the payment of the promissory note and obligating them to fulfill the borrower's obligations in case of default. 4. Limited/Unlimited Guaranty: Specify whether the guaranty is limited or unlimited, clearly defining the extent of the guarantor's liability. 5. Notice and Demand: Detail the process and timeline the lender must follow when requesting payment from the guarantor after the borrower's default. 6. Indemnity: Include an indemnification clause, which ensures that the guarantor will reimburse the lender for any costs, expenses, or damages incurred in enforcing the collection of the promissory note. 7. Governing Law: Specify that the South Carolina law governs the interpretation, enforcement, and validity of the guaranty. It is important to consult with a legal professional to ensure the South Carolina Guaranty of Collection of Promissory Note accurately reflects the intentions of all parties involved and complies with the applicable state laws.
