Question 4 Explain the basic differences between a suretyship and a pledge. Question 5 What is meant by the fact that security is accessory in nature

Question

Question 4 Explain the basic differences between a suretyship and a pledge.  Question 5   What is meant by the fact that security is accessory in nature

GPT 3.5 · Answer

Question 4: Suretyship and pledge are both forms of security agreements, but they have distinct differences:

Suretyship: In a suretyship, a third party, known as the surety, agrees to be responsible for the debt or obligation of another party, known as the principal debtor. The surety guarantees the performance of the principal debtor's obligations and becomes liable for the debt if the principal debtor fails to fulfill their obligations. The surety has a separate agreement with the creditor, providing assurance that they will fulfill the obligation if the principal debtor defaults. The surety does not have a direct interest in the underlying debt or obligation.

Pledge: In a pledge, the debtor pledges an asset, such as real estate, stocks, or valuable goods, as collateral to secure the debt or obligation. The asset is handed over to the creditor, who holds it as security and has the right to possess and, if necessary, sell the asset to recover the debt if the debtor defaults. The pledgee (creditor) has a direct interest in the pledged asset and can either keep the asset if the debtor defaults or sell it to satisfy the debt.

Question 5: The fact that security is accessory in nature means that it is related to, and dependent on, the underlying obligation or debt. Security is not an independent agreement but is connected to the primary obligation. It provides an additional guarantee for the fulfillment of the primary obligation. If the primary obligation ceases to exist or is invalidated, the security agreement also loses its purpose and may become void.

This concept of accessory nature implies that security agreements cannot exist independently and must have a valid and enforceable primary obligation. The security agreement will be extinguished or released once the underlying obligation is satisfied, discharged, or invalidated. The terms and enforceability of the security agreement are closely tied to the terms and enforceability of the primary obligation.