If a guaranty contract is entered into subsequent to the original transaction:

Question

Quizplus · Accepted Answer

In order for a guaranty contract entered into subsequent to the original transaction to be legally binding, new consideration must be given to the guarantor in exchange for their promise to guarantee the transaction. This is because the original contract did not involve the guarantor, and therefore they are not bound to the terms of the original agreement unless new consideration is given. Option A is incorrect because state legislature permission is not required for a guaranty contract. Option B is incorrect because new consideration is required. Option D is incorrect because new consideration is required for the promise of the surety (another term for guarantor).

If a Guaranty Contract Is Entered into Subsequent to the Original