Maybe you’ve been asked by a friend to act as a co-maker in a loan obligation. You’re then asked to sign a promissory note or a debt instrument which designates you as a co-maker. We usually see no problem with signing as a co-maker, especially if it’s someone we know and we trust that he/she will pay the debt. I’ve seen, however, co-makers being held liable because the principal debtor was not able to pay. Perhaps you would want to know the extent of your liability as a co-maker before signing.

Some forms, as noted above, merely require a co-maker to sign on a space provided on the main loan agreement. In other instances, the co-maker is asked to sign a promissory note that looks like this:

I, ____, as the co-maker of the above-quoted loan, have fully understood the contents of this Promissory Note for Short-Term Loan. That as Co-maker, I am fully aware that I shall be jointly and severally or solidarily liable with the above principal maker of this note.

A co-maker is generally treated as a surety. In a contract of suretyship, one lends his credit by joining in the principal debtor’s obligation, so as to render himself directly and primarily responsible with the principal debtor. A surety is bound equally and absolutely with the principal, and is deemed an original promisor and debtor from the beginning. This is because in suretyship there is but one contract, and the surety is bound by the same agreement which binds the principal. The lender has the option of proceeding against the principal debtor, directly against the co-maker even without trying to collect from the principal debtor, or simultaneously against both. This is without prejudice to the right of the co-maker to go against that principal debtor for reimbursement.

In some instances, the co-maker would argue that he/she is merely a guarantor, not a surety. The two concepts, of course, are different. A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor. A suretyship is an undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety promises to pay the principal’s debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay.  A surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor. (Source: Palmares vs. CA, G.R. No. 126490, 31 March 1998)

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