GA Code § 10-7-4 (2021)
2021 Georgia Code|Title 10 - Commerce and Trade|Chapter 7 - Suretyship|Article 1 - Contract of Suretyship|§ 10-7-4. Form of Contract Immaterial

 The form of the contract is immaterial, provided the fact of suretyship exists.   (Orig. Code 1863, § 2128; Code 1868, § 2123; Code 1873, § 2151; Code 1882, § 2151; Civil Code 1895, § 2969; Civil Code 1910, § 3541; Code 1933, § 103-104.)   Editor's notes.   - In Massell v. Prudential Ins. Co. of America, 57 Ga. App. 460, 196 S.E. 115 (1938), it was held that this section, under which an accommodation endorser was considered merely a surety, must yield to the former Negotiable Instruments Law, Ga. L. 1924, p. 126, which has in turn been superseded by the commercial paper provisions of the Uniform Commercial Code, O.C.G.A. §§ 11-3-101 through11-3-805. The UCC provides that a signature in an ambiguous capacity is an endorsement (O.C.G.A. § 11-3-402); that an accommodation party is liable in the capacity in which he has signed, even though the taker knows of the accommodation, where the instrument has been taken for value before it is due (O.C.G.A. § 11-3-415(2)); that oral proof of the accommodation is not admissible against a holder in due course who has no notice of the accommodation to give the accommodation party the benefit of discharges dependent on his character as such, but in other cases is admissible ( § 11-3-415(3)); and that an accommodation party paying the instrument has a right of recourse against the accommodated party ( § 11-3-415(5)), and spells out the liability of makers, drawers, acceptors, endorsers, and guarantors (O.C.G.A. §§ 11-3-413,11-3-414, and11-3-416) and how the liability of parties to commercial paper is discharged ( §§ 11-3-601 through11-3-606).    Many cases involving negotiable instruments were decided under this section before the UCC became effective. See, for example, Freeman v. Cherry, 46 Ga. 14 (1872); Camp v. Simmons, 62 Ga. 73 (1878), later appeals, 64 Ga. 726, 65 Ga. 674 (1880), 71 Ga. 54 (1883); Patillo v. Mayer & Glauber, 70 Ga. 715 (1883); Hall v. Capital Bank, 71 Ga. 715 (1883); Parmelee v. Williams, 72 Ga. 42 (1883); Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893); Baggs v. Funderburke, 11 Ga. App. 173, 74 S.E. 937 (1912); Bank of LaFayette v. Wardlaw, 20 Ga. App. 741, 93 S.E. 236 (1917); Washington Loan & Banking Co. v. Holliday, 26 Ga. App. 792, 107 S.E. 370, cert. denied, 26 Ga. App. 801 (1921); Taff v. Larey, 29 Ga. App. 631, 116 S.E. 866 (1923); McKibben v. Fourth Nat'l Bank, 32 Ga. App. 222, 122 S.E. 891 (1924); Smith v. Moore, 45 Ga. App. 708, 165 S.E. 765 (1932); Hamby v. Crisp, 48 Ga. App. 418, 172 S.E. 842 (1934).   Law reviews.   - For article, "Enforcing Commercial Real Estate Loan Guaranties," see 15 (No. 2) Ga. St. B. J. 12 (2009).   JUDICIAL DECISIONS   Editor's notes.   - In light of the similarity of the statutory provisions, annotations decided before the UCC became effective January 1, 1964, are included in the annotations for this Code section and must be considered in light of the UCC provisions referred to above.   Form of contract makes no difference.    - Form of the contract can make no difference, if the fact of suretyship is made to appear from the evidence and that fact was known to all the parties. Norris v. Pollard, 75 Ga. 358 (1885); Buck v. Bank of Ga., 104 Ga. 660, 30 S.E. 872 (1898).    Mere language of the contract does not determine the contract's legal character. Courts may disregard formal expressions to ascertain the real intent of the parties. Schlittler & Johnson v. Deering Harvester Co., 3 Ga. App. 86, 59 S.E. 342 (1907).   Form is immaterial if the fact of suretyship exists. United States v. Ferguson, 409 F. Supp. 393 (S.D. Ga. 1975), aff'd, 529 F.2d 999 (5th Cir. 1976).   Formal expressions may be disregarded.    - No particular or formal phrase is required to create a contract of surety. Courts may disregard formal expressions to ascertain the real intent of the parties, and the form of the contract is immaterial. W.T. Raleigh Co. v. Overstreet, 71 Ga. App. 873, 32 S.E.2d 574 (1944); United States v. Ferguson, 409 F. Supp. 393 (S.D. Ga. 1975), aff'd, 529 F.2d 999 (5th Cir. 1976).   Suretyship may be created by separate instrument.    - While a surety is usually bound with the surety's principal by the same instrument, that is not always true, and one may assume that the relation of suretyship exists even by an instrument separate and distinct from that of the surety's principal and also subsequent in time. McKibben v. Fourth Nat'l Bank, 32 Ga. App. 222, 122 S.E. 891 (1924), overruled on other grounds, Timberlake Grocery Co. v. Cartwright, 146 Ga. App. 746, 247 S.E.2d 567 (1978); Griswold v. Wells Aluminum, Moultrie, Inc., 156 Ga. App. 19, 274 S.E.2d 7 (1980).   Written instrument is not required.    - Fact that written instrument may not have been executed between the creditor and an alleged surety does not preclude existence of a suretyship. Griswold v. Wells Aluminum, Moultrie, Inc., 156 Ga. App. 19, 274 S.E.2d 7 (1980).   Suretyship may be shown although not on face of instrument.    - When the evidence offered tended to show that B signed the note purely for the accommodation of S to enable the latter to borrow the money from the bank, that B did not receive a cent of the money, that B had no interest in the loan and that B therefore obligated B to pay S's debt in consideration of the credit extended to S by the bank while S remained bound for the debt, under the provision of this section, B was only a surety for S. Buck v. Bank of Ga., 104 Ga. 660, 30 S.E. 872 (1898).    Although the fact of suretyship does not appear on the face of a note, the defendants are clearly entitled to show that the defendants were only sureties by virtue of this section. Duggan v. Monk, 5 Ga. App. 206, 62 S.E. 1017 (1908).    If a negotiable promissory note purports to have been given "for value received," and suit is brought thereon by the payee, the maker may plead and prove by parol that the note was executed without consideration as between the parties, and for the sole purpose of enabling the payee to endorse the note to a third person as collateral security for a debt which the payee desired to contract and which the payee promised to pay without assistance from the maker of the note. Such a note is a mere accommodation paper and, while in the hands of the person to be accommodated, is without consideration and binds nobody, but it would be otherwise if the note were in the hands of an endorsee who received the note for value. Rheney v. Anderson, 22 Ga. App. 417, 96 S.E. 217, cert. denied, 22 Ga. App. 803 (1918), later appeal, 152 Ga. 418, 110 S.E. 164 (1921).    One who signs a note with another apparently as a joint principal may in an action by the payee plead and prove that one had no interest in the paper and was only surety for the accommodation of the other and principal signer, and that the plaintiff took the note with knowledge of such facts. Cheshire v. Hightower, 33 Ga. App. 793, 127 S.E. 891 (1925).    One who signs a note ostensibly as a coprincipal may in fact be a surety, and this may be established by parol. Campbell v. Rybert, 46 Ga. App. 461, 167 S.E. 924 (1933).   Creditor's reliance on surety's credit does not alter rule.    - Fact that the payee of the note might have been induced to make the loan on the faith of the surety's credit, rather than upon that of the principal debtor, would not alter the rule. Cheshire v. Hightower, 33 Ga. App. 793, 127 S.E. 891 (1925).    Surety usually bound with principal by same instrument, executed at same time, and on same consideration; the surety is an original promisor and debtor from the beginning. Griswold v. Whetsell, 157 Ga. App. 800, 278 S.E.2d 753 (1981).    Surety or guarantor may consent in advance to conduct which would otherwise result in surety's discharge. Griswold v. Whetsell, 157 Ga. App. 800, 278 S.E.2d 753 (1981).    Cited in Freeman v. Cherry, 46 Ga. 14 (1872); Camp v. Simmons, 62 Ga. 73 (1873); Patillo v. Mayor & Glauber, 70 Ga. 715 (1883); Hall v. Capital Bank, 71 Ga. 715 (1883); Parmelee v. Williams, 72 Ga. 42 (1883); Hull v. Myers, 90 Ga. 674, 16 S.E. 653 (1893); Baggs v. Funderburke, 11 Ga. App. 173, 74 S.E. 937 (1912); Bank of Lafayette v. Wardlaw, 20 Ga. App. 741, 93 S.E. 236 (1917); Burkhalter v. Conley, 24 Ga. App. 256, 100 S.E. 725 (1919); Washington Loan & Banking Co. v. Holliday, 26 Ga. App. 792, 107 S.E. 370 (1921); Meldrim v. Peoples Bank, 28 Ga. App. 294, 111 S.E. 76 (1922); Taff v. Larey, 29 Ga. App. 631, 116 S.E. 866 (1923); Federal Reserve Bank v. Lane, 35 Ga. App. 177, 132 S.E. 247 (1926); Mulling v. Bank of Cobbtown, 36 Ga. App. 55, 135 S.E. 222 (1926); Durden v. Youmans, 37 Ga. App. 182, 139 S.E. 91 (1927); Holton v. Smith, 44 Ga. App. 832, 163 S.E. 516 (1932); Smith v. Moore, 45 Ga. App. 708, 165 S.E. 765 (1932); Stapler v. Anderson, 177 Ga. 434, 170 S.E. 498 (1933); Hamby v. Crisp, 48 Ga. App. 418, 172 S.E. 842 (1934); Alropa Corp. v. Snyder, 182 Ga. 305, 185 S.E. 352 (1936); Lamis v. Callianos, 57 Ga. App. 238, 194 S.E. 923 (1938); Parker v. Puckett, 129 Ga. App. 265, 199 S.E.2d 343 (1973); Yancey Bros. Co. v. Sure Quality Framing Contractors, 135 Ga. App. 465, 218 S.E.2d 142 (1975); Motz v. Landmark First Nat'l Bank, 154 Ga. App. 858, 270 S.E.2d 81 (1980); Seay's Home Furnishings, Inc. v. Dozier Home Bldrs., Inc., 176 Ga. App. 660, 337 S.E.2d 440 (1985); Cohen v. Capco Sportswear, Inc., 225 Ga. App. 211, 483 S.E.2d 634 (1997); Capital Color Printing, Inc. v. Ahern, 291 Ga. App. 101, 661 S.E.2d 578 (2008).   RESEARCH REFERENCES   Am. Jur. 2d.   - 74 Am. Jur. 2d, Suretyship, § 9 et seq.   C.J.S.   - 72 C.J.S., Principal and Surety, §§ 29, 30.   ALR.    - Right of accommodation party to bill or note to revoke his signature, 22 A.L.R. 1348.    Ignorance or mistake as to character of instrument signed as affecting liability of surety or guarantor, 66 A.L.R. 312.   Question, as one of law for court or of fact for jury, whether oral promise was an original one or was a collateral promise to answer for the debt, default, or miscarriage of another, 20 A.L.R.2d 246.