Chapter
01. Guaranty
02. Suretyship
03. Indemnity
56-1-1
Guaranty defined.
56-1-2
Knowledge of principal unnecessary to creation of guaranty.
56-1-3
Consideration--When required.
56-1-4
Requirements as to writing--Signature of guarantor--Expression of consideration
unnecessary.
56-1-5
Promise for consideration to answer for obligation of another--Writing unnecessary.
56-1-6
Obligation which renders the party making the promise the principal debtor, and the
person in whose behalf it is made the surety--Writing unnecessary.
56-1-7
Promise for antecedent obligation of another--Writing unnecessary.
56-1-8
Undertaking by factor to sell merchandise and guarantee sale--Writing unnecessary.
56-1-9
Holder of instrument for the payment of money, upon which third person liable,
transferring it in payment of precedent debt entering into a promise respecting such
instrument--Writing unnecessary.
56-1-10
Acceptance of guaranty.
56-1-11
Guaranty of incomplete contract.
56-1-12
Guaranty that obligation is good or collectible.
56-1-13
Recovery upon guaranty that obligation is good or collectible.
56-1-14
Failure to take proceedings upon principal debt does not discharge guaranty of
solvency.
56-1-15
Construction of guaranty--Unconditional in absence of terms importing condition
precedent.
56-1-16
Liability of guarantor--Time of accrual--Default of principal--Demand or notice
unnecessary.
56-1-17
Liability of guarantor of conditional obligation--Notice of default.
56-1-18
Obligations of guarantor--Scope and limitations.
56-1-19
Liability of guarantor--Contract of principal unlawful--Personal disability of
principal.
56-1-20
Continuing guaranty defined.
56-1-21
Revocation of continuing guaranty--Exception.
56-1-22
Exoneration of guarantor--Alteration of original obligation of principal--Impairment
of rights of creditors.
56-1-23
Void promises do not exonerate guarantor.
56-1-24
Liability of guarantor exonerated by agreement altering original obligation of debtor
or impairing remedy of creditor not restored by rescission of such agreement.
56-1-25
Obligation of guarantor reduced by partial satisfaction of obligation.
56-1-26
Delay of creditors in enforcement of remedy--Guarantor not exonerated.
56-1-27
Liability of indemnified guarantor.
56-1-28
Discharge of principal by operation of law--Guarantor not exonerated.
56-1-1. Guaranty defined.
A guaranty is a promise to answer for the debt, default, or miscarriage of another person.
Source: SDC 1939, § 26.0101.
56-1-2. Knowledge of principal unnecessary to creation of guaranty.
A person may become guarantor even without the knowledge or consent of the principal.
Source: SDC 1939, § 26.0102.
56-1-3. Consideration--When required.
Where a guaranty is entered into at the same time with the original obligation or with the acceptance of the latter by the guarantee and forms, with that obligation, a part of the consideration to him, no other consideration need exist. In all other cases there must be a consideration distinct from that of the original obligation.
Source: SDC 1939, § 26.0103.
56-1-4. Requirements as to writing--Signature of guarantor--Expression of consideration unnecessary.
Except as prescribed by §§ 56-1-5 to 56-1-9, inclusive, a guaranty must be in writing and signed by the guarantor; but the writing need not express a consideration.
Source: SDC 1939, § 26.0104.
56-1-5. Promise for consideration to answer for obligation of another--Writing unnecessary.
A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where the promise is made by one who has received property of another upon an undertaking to apply it pursuant to such promise, or by one who has received a discharge from an obligation in whole or in part in consideration of such promise.
Source: SDC 1939, § 26.0105 (1).
56-1-6. Obligation which renders the party making the promise the principal debtor, and the person in whose behalf it is made the surety--Writing unnecessary.
A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where the creditor parts with value or enters into an obligation, in consideration of the obligation in respect to which the promise is made, in terms or under circumstances such as to render the party making the promise the principal debtor, and the person in whose behalf it is made his surety.
Source: SDC 1939, § 26.0105 (2).
56-1-7. Promise for antecedent obligation of another--Writing unnecessary.
A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where the promise, being for an antecedent obligation of another, is made upon the consideration that the party receiving it cancels the antecedent obligation, accepting the new promise as a substitute therefor; or upon the consideration that a party receiving it releases the property of another from a levy or his person from imprisonment under an execution on a judgment obtained upon the antecedent obligation; or upon a consideration beneficial to the promiser, whether moving from either party to the antecedent obligation, or from another person.
Source: SDC 1939, § 26.0105 (3).
56-1-8. Undertaking by factor to sell merchandise and guarantee sale--Writing unnecessary.
A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where a factor undertakes, for a commission, to sell merchandise and guarantee the sale.
Source: SDC 1939, § 26.0105 (4).
56-1-9. Holder of instrument for the payment of money, upon which third person liable, transferring it in payment of precedent debt entering into a promise respecting such instrument--Writing unnecessary.
A promise to answer for the obligation of another is deemed an original obligation of the promiser and need not be in writing where the holder of an instrument for the payment of money, upon which a third person is or may become liable to him, transfers it in payment of a precedent debt of his own or for a new consideration, and in connection with such transfer enters into a promise respecting such instrument.
Source: SDC 1939, § 26.0105 (5).
56-1-10. Acceptance of guaranty.
A mere offer to guarantee is not binding until notice of its acceptance is communicated by the guarantee to the guarantor, but an absolute guaranty is binding upon the guarantor without notice of acceptance.
Source: SDC 1939, § 26.0106.
56-1-11. Guaranty of incomplete contract.
In a guaranty of a contract, the terms of which are not then settled, it is implied that its terms shall be such as will not expose the guarantor to greater risks than he would incur under those terms which are most common in similar contracts at the place where the principal contract is to be performed.
Source: SDC 1939, § 26.0107.
56-1-12. Guaranty that obligation is good or collectible.
A guaranty to the effect that an obligation is good or is collectible imports that the debtor is solvent and that the demand is collectible by the usual legal proceedings, if taken with reasonable diligence.
Source: SDC 1939, § 26.0108.
56-1-13. Recovery upon guaranty that obligation is good or collectible.
In the cases mentioned in § 56-1-12, the removal of the principal from the state, leaving no property therein from which the obligation might be satisfied, is equivalent to the insolvency of the principal in its effect upon the rights and obligations of the guarantor.
Source: SDC 1939, § 26.0108.
56-1-14. Failure to take proceedings upon principal debt does not discharge guaranty of solvency.
A guaranty such as is mentioned in § 56-1-12 is not discharged by any omission to take proceedings upon the principal debt or upon any collateral security for its payment, if no part of the debt could have been collected thereby.
Source: SDC 1939, § 26.0108.
56-1-15. Construction of guaranty--Unconditional in absence of terms importing condition precedent.
A guaranty is to be deemed unconditional unless its terms import some condition precedent to the liability of the guarantor.
Source: SDC 1939, § 26.0109.
56-1-16. Liability of guarantor--Time of accrual--Default of principal--Demand or notice unnecessary.
A guarantor of payment or performance is liable to the guarantee immediately upon the default of the principal and without demand or notice.
Source: SDC 1939, § 26.0110.
56-1-17. Liability of guarantor of conditional obligation--Notice of default.
Where one guarantees a conditional obligation his liability is commensurate with that of the principal, and he is not entitled to notice of the default of the principal unless he is unable, by the exercise of reasonable diligence, to acquire information of such default, and the creditor has actual notice thereof.
Source: SDC 1939, § 26.0111.
56-1-18. Obligations of guarantor--Scope and limitations.
The obligation of a guarantor must be neither larger in amount nor in other respects more burdensome than that of the principal, and if in its terms it exceeds it, it is reducible in proportion to the principal obligation.
Source: SDC 1939, § 26.0112.
56-1-19. Liability of guarantor--Contract of principal unlawful--Personal disability of principal.
A guarantor is not liable if the contract of the principal is unlawful, but he is liable notwithstanding any mere personal disability of the principal, though the disability be such as to make the contract void against the principal.
Source: SDC 1939, § 26.0113.
56-1-20. Continuing guaranty defined.
A guaranty relating to a future liability of the principal, under successive transactions which either continue his liability or from time to time renew it after it has been satisfied, is called a continuing guaranty.
Source: SDC 1939, § 26.0114.
56-1-21. Revocation of continuing guaranty--Exception.
A continuing guaranty may be revoked at any time by the guarantor, in respect to future transactions unless there is a continuing consideration as to such transactions which he does not renounce.
Source: SDC 1939, § 26.0115.
56-1-22. Exoneration of guarantor--Alteration of original obligation of principal--Impairment of rights of creditors.
A guarantor is exonerated except so far as he may be indemnified by the principal if by any act of the creditor, without the consent of the guarantor, the original obligation of the principal is altered in any respect or the remedies or rights of the creditor against the principal in respect thereto in any way impaired or suspended.
Source: SDC 1939, § 26.0116.
56-1-23. Void promises do not exonerate guarantor.
A promise by a creditor which for any cause is void or voidable by him at his option does not alter the obligation or suspend or impair the remedy within the meaning of § 56-1-22.
Source: SDC 1939, § 26.0117.
56-1-24. Liability of guarantor exonerated by agreement altering original obligation of debtor or impairing remedy of creditor not restored by rescission of such agreement.
The rescission of an agreement altering the original obligation of a debtor or impairing the remedy of a creditor does not restore the liability of a guarantor who has been exonerated by such agreement.
Source: SDC 1939, § 26.0118.
56-1-25. Obligation of guarantor reduced by partial satisfaction of obligation.
The acceptance by a creditor of anything in partial satisfaction of an obligation reduces the obligation of a guarantor thereof in the same measure as that of the principal, but does not otherwise affect it.
Source: SDC 1939, § 26.0119.
56-1-26. Delay of creditors in enforcement of remedy--Guarantor not exonerated.
Mere delay on the part of a creditor to proceed against the principal or to enforce any other remedy does not exonerate a guarantor.
Source: SDC 1939, § 26.0120.
56-1-27. Liability of indemnified guarantor.
A guarantor who has been indemnified by the principal is liable to the creditor to the extent of the indemnity notwithstanding that the creditor, without the assent of the guarantor, may have modified the contract or released the principal.
Source: SDC 1939, § 26.0121.
56-1-28. Discharge of principal by operation of law--Guarantor not exonerated.
A guarantor is not exonerated by the discharge of his principal by operation of law without the intervention or omission of the creditor.
Source: SDC 1939, § 26.0122.
56-2-1
Suretyship defined.
56-2-2
Apparent principal may show that he is a surety.
56-2-3
Joint control of deposits of assets--Agreement between insured and surety--Withdrawal procedure.
56-2-4
Rights of a surety same as guarantor.
56-2-5
Performance of obligation when due by principal--Compelling by surety.
56-2-6
Neglect of creditor to proceed against principal at request of surety--Surety
exonerated to the extent which he is prejudiced.
56-2-7
Property of principal first resorted to.
56-2-8
Surety exonerated in like manner with guarantor.
56-2-9
Surety exonerated by performance or offer of performance.
56-2-10
Surety exonerated to extent prejudiced by act of creditor.
56-2-11
Surety exonerated to extent prejudiced by omission of creditor.
56-2-12
Liability of surety limited by express terms of contract--Penalty for breach.
56-2-13
Suretyship relation not changed by creditor's judgment against surety.
56-2-14
Satisfaction of principal obligation by surety--Reimbursement, exception as to other
persons.
56-2-15, 56-2-16. Repealed.
56-2-17
Surety subrogated to rights of creditor.
56-2-1. Suretyship defined.
Suretyship is a contract by which one who at the request of another and for the purpose of securing to him a benefit becomes responsible for the performance by the latter of some act in favor of a third person or hypothecates property as security therefor.
Source: SDC 1939, § 26.0201.
56-2-2. Apparent principal may show that he is a surety.
One who appears to be a principal whether by terms of a written instrument or otherwise may show that he is in fact a surety except as against persons who have acted on the faith of his apparent character of principal.
Source: SDC 1939, § 26.0203.
56-2-3. Joint control of deposits of assets--Agreement between insured and surety--Withdrawal procedure.
It shall be lawful for any party of whom a bond, undertaking or other obligation is required, to agree with his surety or sureties for the deposit of any or all moneys and assets for which he and his surety or sureties are or may be held responsible, with a bank, savings bank, safe deposit or trust company, authorized by law to do business as such or with other depository approved by the court or a judge thereof, if such deposit is otherwise proper, for the safekeeping thereof, and in such manner as to prevent the withdrawal of such money or assets or any part thereof, without the written consent of such surety or sureties, or an order of court, or a judge thereof made on such notice to such surety or sureties as such court or judge may direct; provided, however, that such agreement shall not in any manner release from or change the liability of the principal or sureties as established by the terms of said bond.
Source: SL 1951, ch 174; SDC Supp 1960, § 31.3109.
56-2-4. Rights of a surety same as guarantor.
A surety has all the rights of a guarantor whether he becomes personally responsible or not.
Source: SDC 1939, § 26.0206.
56-2-5. Performance of obligation when due by principal--Compelling by surety.
A surety may compel his principal to perform the obligation when due.
Source: SDC 1939, § 26.0208.
56-2-6. Neglect of creditor to proceed against principal at request of surety--Surety exonerated to the extent which he is prejudiced.
A surety may require his creditor to proceed against the principal or to pursue any other remedy in his power which the surety cannot himself pursue and which would lighten his burden, and if in such case the creditor neglects to do so, the surety is exonerated to the extent to which he is thereby prejudiced.
Source: SDC 1939, § 26.0207.
56-2-7. Property of principal first resorted to.
Whenever property of a surety is hypothecated with the property of the principal, the surety is entitled to have the property of the principal first applied to the discharge of the obligation.
Source: SDC 1939, § 26.0212.
56-2-8. Surety exonerated in like manner with guarantor.
A surety is exonerated in like manner with the guarantor.
Source: SDC 1939, § 26.0205 (1).
56-2-9. Surety exonerated by performance or offer of performance.
A surety is exonerated by performance of the principal obligation or tender of such performance duly made as provided in this code.
Source: SDC 1939, § 26.0205 (2).
56-2-10. Surety exonerated to extent prejudiced by act of creditor.
A surety is exonerated to the extent to which he is prejudiced by any act of the creditor which would naturally prove injurious to the remedies of the surety or inconsistent with his rights or which lessens his security.
Source: SDC 1939, § 26.0205 (3).
56-2-11. Surety exonerated to extent prejudiced by omission of creditor.
A surety is exonerated to the extent to which he is prejudiced by an omission of the creditor to do anything when required by the surety which it is his duty to do.
Source: SDC 1939, § 26.0205 (4).
56-2-12. Liability of surety limited by express terms of contract--Penalty for breach.
A surety cannot be held beyond the express terms of his contract, and if such contract prescribes a penalty for its breach, he cannot in any case be liable for more than the penalty.
Source: SDC 1939, § 26.0202.
56-2-13. Suretyship relation not changed by creditor's judgment against surety.
Notwithstanding the recovery of a judgment by a creditor against a surety, the latter still occupies the relation of surety.
Source: SDC 1939, § 26.0204.
56-2-14. Satisfaction of principal obligation by surety--Reimbursement, exception as to other persons.
If a surety satisfies the principal obligation or any part thereof, whether with or without legal proceedings, the principal is bound to reimburse what he has disbursed including necessary costs and expenses, but the surety has no claim for reimbursement against other persons, though they may have been benefited by his act, except as prescribed by § 56-2-15.
Source: SDC 1939, § 26.0209.
56-2-15, 56-2-16. Repealed by SL 1981, ch 357, §§ 1, 2.
56-2-17. Surety subrogated to rights of creditor.
If the duty of the principal to the creditor is fully satisfied, the surety, to the extent that he has contributed to this satisfaction, is subrogated to all of the following:
(1) The rights of the creditor against the principal;
(2) Subject to the rule stated in subdivision (4) of this section, the interests which the creditor has in security for the principal's performance and in which the creditor has no continuing interest;
(3) The rights of the creditor against persons other than the principal whose negligence, willful conduct or breach of contract has made them liable to the creditor for the same default, loss or damage; and
(4) The rights of the creditor against cosureties and to the creditor's interest in security held by them, but in such case the cosurety's personal liability is limited to the amount which will satisfy his duty to contribute his share of the principal's default.
Source: SL 1981, ch 357, § 3.
56-3-1
Indemnity defined.
56-3-2
Indemnity for a future wrongful act void.
56-3-3
Indemnity for past wrongful act valid.
56-3-4
Indemnity extends to acts of agents.
56-3-5
Agreement to indemnify several persons applies to each.
56-3-6
Persons indemnifying liable jointly or severally with person indemnified.
56-3-7
Interpretation of contract of indemnity--Application of rules.
56-3-8
Indemnity against liability--Recovery by person indemnified.
56-3-9
Indemnity against claims, demands or damages--Recovery by person indemnified,
payment required.
56-3-10
Indemnity against claims, demands or liability--Matters embraced in contract.
56-3-11
Defense by indemnitor of actions against indemnified--Right of person indemnified
to conduct defense.
56-3-12
Neglect of person indemnifying to defend the person indemnified--Recovery against
person indemnified conclusive.
56-3-13
Notice of action or proceedings against indemnified not received by indemnitor--Indemnitor not allowed to control defense--Judgment against indemnitor presumptive
evidence.
56-3-14
Application of stipulation as to conclusiveness of judgment against person
indemnified upon indemnitor.
56-3-15
Reimbursement of indemnitor.
56-3-16
Indemnification of architect or engineer for own errors prohibited in construction
contract.
56-3-17
Conflicting provision in construction contract unlawful and unenforceable.
56-3-18
Indemnity agreement void as to liability for negligence in construction, repair or
maintenance of structure or equipment.
56-3-1. Indemnity defined.
Indemnity is a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person.
Source: SDC 1939, § 31.3101; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 1.
56-3-2. Indemnity for a future wrongful act void.
An agreement to indemnify a person against an act thereafter to be done, is void if the act be known by such person at the time of doing it to be unlawful. This section shall only apply to an unlawful act that involves moral turpitude.
Source: SDC 1939, § 31.3102; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 2.
56-3-3. Indemnity for past wrongful act valid.
An agreement to indemnify a person against an act already done is valid, even though the act was known to be wrongful, unless it was a felony.
Source: SDC 1939, § 31.3103; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 3.
56-3-4. Indemnity extends to acts of agents.
An agreement to indemnify against the acts of a certain person, applies not only to his acts and their consequences, but also to those of his agents.
Source: SDC 1939, § 31.3104; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 4.
56-3-5. Agreement to indemnify several persons applies to each.
An agreement to indemnify several persons applies to each, unless a contrary intention appears.
Source: SDC 1939, § 31.3105; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 5.
56-3-6. Persons indemnifying liable jointly or severally with person indemnified.
One who indemnifies another against an act to be done by the latter, is liable jointly with the person indemnified, and separately to every person injured by such act.
Source: SDC 1939, § 31.3106; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 6.
56-3-7. Interpretation of contract of indemnity--Application of rules.
In the interpretation of a contract of indemnity, the rules set forth in §§ 56-3-8 to 56-3-15, inclusive, are to be applied, unless a contrary intention appears.
Source: SDC 1939, § 31.3107; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7.
56-3-8. Indemnity against liability--Recovery by person indemnified.
Upon an indemnity against liability, expressly, or in other equivalent terms, unless a contrary intention appears, the person indemnified is entitled to recover upon becoming liable.
Source: SDC 1939, § 31.3107 (1); repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7 (1).
56-3-9. Indemnity against claims, demands or damages--Recovery by person indemnified, payment required.
Upon an indemnity against claims or demands, or damages or costs expressly, or in equivalent terms, unless a contrary intention appears, the person indemnified is not entitled to recover without payment thereof.
Source: SDC 1939, § 31.3107 (2); repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7 (2).
56-3-10. Indemnity against claims, demands or liability--Matters embraced in contract.
Unless a contrary intention appears, an indemnity against claims or demands, or liability, expressly, or in other equivalent terms, embraces the costs of defense against such claims, demands, or liability incurred in good faith, and in the exercise of reasonable discretion.
Source: SDC 1939, § 31.3107 (3); repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7.
56-3-11. Defense by indemnitor of actions against indemnified--Right of person indemnified to conduct defense.
Unless a contrary intention appears, the person indemnifying is bound, on request of the person indemnified, to defend actions or proceedings brought against the latter in respect to the matters embraced by the indemnity; but the person indemnified has the right to conduct such defenses, if he chooses to do so.
Source: SDC 1939, § 31.3107 (4); repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7 (4).
56-3-12. Neglect of person indemnifying to defend the person indemnified--Recovery against person indemnified conclusive.
If, after request, the person indemnifying neglects to defend the person indemnified, unless a contrary intention appears, a recovery against the latter suffered by him in good faith, is conclusive in his favor against the former.
Source: SDC 1939, § 31.3107 (5); repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7 (5).
56-3-13. Notice of action or proceedings against indemnified not received by indemnitor--Indemnitor not allowed to control defense--Judgment against indemnitor presumptive evidence.
If the person indemnifying, whether he is a principal or a surety in the agreement, has not reasonable notice of the action or proceeding against the person indemnified, or is not allowed to control its defense, judgment against the latter is only presumptive evidence against the former unless a contrary intention appears.
Source: SDC 1939, § 31.3107 (6); repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7 (6).
56-3-14. Application of stipulation as to conclusiveness of judgment against person indemnified upon indemnitor.
A stipulation that a judgment against the person indemnified shall be conclusive upon the person indemnifying, is inapplicable, unless a contrary intention appears, if the person indemnified had a good defense upon the merits, which, by want of ordinary care, he failed to establish in the action.
Source: SDC 1939, § 31.3107 (7); repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 7 (7).
56-3-15. Reimbursement of indemnitor.
Where one, at the request of another, engages to answer in damages whether liquidated or unliquidated, for any violation of duty on the part of the latter, he is entitled to be reimbursed in the same manner as a surety for whatever he may pay.
Source: SDC 1939, § 31.3108; repealed SL 1966, ch 111, § 5; re-enacted SL 1967, ch 235, § 8.
56-3-16. Indemnification of architect or engineer for own errors prohibited in construction contract.
Construction contracts, plans and specifications which contain indemnification provisions shall include the following provision:
The obligations of the contractor shall not extend to the liability of the architect or engineer, his agents or employees arising out of:
(1) The preparation or approval of maps, drawings, opinions, reports, surveys, change orders, designs or specifications, or
(2) The giving of or the failure to give directions or instructions by the architect, or engineer, his agents or employees provided such giving or failure to give is the primary cause of the injury or damage.
Source: SL 1972, ch 256, § 1.
56-3-17. Conflicting provision in construction contract unlawful and unenforceable.
Any indemnification provision in a construction contract in conflict with § 56-3-16 shall be unlawful and unenforceable.
Source: SL 1972, ch 256, § 2.
56-3-18. Indemnity agreement void as to liability for negligence in construction, repair or maintenance of structure or equipment.
A covenant, promise, agreement or understanding in, or in connection with or collateral to, a contract or agreement relative to the construction, alteration, repair or maintenance of a building, structure, appurtenance and appliance, including moving, demolition and excavating connected therewith, purporting to indemnify the promisee against liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the promisee, his agents or employees, or indemnitee, is against the policy of the law and is void and unenforceable.
Source: SL 1973, ch 294.