Suretyship – Termination of suretyship

Suretyship – Termination of suretyship

Art. 3058. Extinction of the suretyship. The obligations of a surety are extinguished by the different manners in which conventional obligations are extinguished, subject to the following modifications.

Art. 3059. Extinction of principal obligation. The extinction of the principal obligation extinguishes the suretyship.

Art. 3060. Prescription of the surety’s obligation, right of reimbursement, and contribution. Prescription of the principal obligation extinguishes the obligation of the surety. A surety’s action for contribution from his co-sureties and his action for reimbursement from the principal obligor prescribe in ten years. The interruption of prescription against a surety is effective against the principal obligor and other sureties only when such parties have mutually agreed to be bound together with the surety against whom prescription was interrupted.

Art. 3061. Termination of suretyship. A surety may terminate the suretyship by notice to the creditor. The termination does not affect the surety’s liability for obligations incurred by the principal obligor, or obligations the creditor is bound to permit the principal obligor to incur at the time the notice is received, nor may it prejudice the creditor or principal obligor who has changed his position in reliance on the suretyship. Knowledge of the death of a surety has the same effect on a creditor as would a notice of termination received from the surety. A termination resulting from notice of the surety’s death does not affect a universal successor of the surety who thereafter unequivocally confirms his willingness to continue to be bound thereby. The confirmation need not be in writing to be enforceable.

Art. 3062. Effect of modifications of principal obligation. The modification or amendment of the principal obligation, or the impairment of real security held for it, by the creditor, in any material manner and without the consent of the surety, has the following effects.

Revision Comments-1987. Louisiana jurisprudence has created a special rule, applicable to compensated sureties who guarantee construction or other contracts, that changes or alterations that do not materially affect the surety’s liability and that bear a reasonable relationship to the extent of the original project will .not release the surety. See State v. Preferred Acc. Ins. Co. of N.Y., 149 So.2d 632 (La.App. 1st Cir.1963). This jurisprudential rule was made statutory in R.S. 9:4812(E)(2). This Article extends that rule to commercial suretyships generally and amplifies its provisions.