Opinion ID: 687599
Heading Depth: 2
Heading Rank: 3

Heading: Rachman's Opportunity to Communicate Information

Text: 35 Rachman further argues that it was entitled to summary judgment as a matter of law even assuming it was under a duty to disclose. Rachman contends that because the bond was irrevocable as soon as TOA obtained it on December 9, it did not have the opportunity to communicate material information to Liberty and thus could not have engaged in fraudulent concealment. This argument fails because its premise is incorrect. 36 A surety's guarantee is not effective until it is delivered to and accepted by the obligee. See 63 N.Y.Jur.2d Guaranty and Suretyship Secs. 60, 63. This requirement holds true even if the principal rather than the obligee obtains the bond from the surety; in that situation, delivery and acceptance by the obligee are necessary for the obligee's rights to vest. See Bostwick v. Van Voorhis, 91 N.Y. at 360 (determining whether there was sufficient acceptance by the obligee for a bond procured by the principal); cf. 63 N.Y.Jur.2d Guaranty and Suretyship Sec. 64 (discussing modes of acceptance). 37 Rachman is correct in stating that for absolute guarantees, which unconditionally guarantee a specific transaction, no notice of the obligee's acceptance is required to make the guarantee binding. See Niles Tool-Works Co. v. Reynolds, 4 A.D. 24, 38 N.Y.S. 1028, 1029 (1896). Yet even though notice of acceptance is not required for absolute guarantees, actual delivery and acceptance are. See Smith v. Dann, 6 Hill 543, 544 (N.Y.App.Div.1844); City Nat'l Bank v. Phelps, 86 N.Y. 484, 493 (1881); 63 N.Y.Jur.2d Guaranty and Suretyship, Sec. 63. The bond is not unalterable by the parties and fully binding on the surety until the obligee manifests some assent to the guarantee. 38 In this case, the bond was simply delivered to TOA on December 9, 1988. Whether or not TOA's fax of a copy of the bond to Rachman constituted delivery, nothing could possibly be construed as constituting acceptance on Rachman's part until mid-January at the earliest, when Rachman's counsel called Liberty to inquire about the bond. See Rachman, 839 F.Supp. at 999. Given this initial lack of acceptance, the trial court did not err in finding that, if Rachman had a duty to disclose material information to Liberty, it had ample opportunity to do so. 39 Furthermore, even if Rachman had accepted the guarantee, Liberty was likely not liable on the bond as originally issued in light of later modifications. In Hall & Co. v. Continental Casualty Co., 34 A.D.2d 1028, 310 N.Y.S.2d 950 (1970), aff'd, 30 N.Y.2d 517, 330 N.Y.S.2d 64, 280 N.E.2d 890 (1972), the court found that a bond that referred to a contract which had not yet been finalized did not bind the surety. See id. 310 N.Y.S.2d at 952. It also noted that once a surety is bound, any subsequent modification of the guarantee discharges the obligation. See id. It is possible to conclude, as Judge Korman did, that Liberty was not bound until the parties executed the contract that the bond purported to secure. Alternatively, Liberty may have been bound on December 9, but the substitution of the January 12 contract discharged the earlier obligation and created a new one. In either case, Rachman would have had ample opportunity to disclose material information before Liberty's obligation matured. Given these possibilities, we cannot conclude that Rachman was entitled to summary judgment.