Liability of Surety

The sureties in an admiralty stipulation can never be compelled to pay more than the specific sum expressed in the stipulation for any default or contumacy of the principal.  Where the stipulation is for a definite sum, stipulators are bound to make good the liability or default of the principal to the amount of the stipulation.  However, they cannot be held to any greater sum, unless they themselves have been guilty of default, in which case they may be held liable for costs and interest, by the way of damages, to the extent that the same have arisen from the breach of their duty to comply with the terms of their stipulation.  Where the stipulation or bond is given for the value of the ship, the obligation of the stipulator is that s/he pay into court the sum ascertained as the value.[i]

The surety on the bond neither promises performance of the charter party nor is s/he authorized to do so.  The surety’s obligation is merely to pay damages in the event of non-performance.  Actions against sureties on bonds securing performance are cognizable in admiralty, if the surety’s obligation under the bond is the same as that of the original promisor.  However, actions are not cognizable, if the surety is obligated only to pay a sum of money and the duties of the original promisor were otherwise.[ii]

[i] “Wanata”, 95 U.S. 600 (U.S. 1877)

[ii] Aqua-Marine Constructors v. Banks, 110 F.3d 663 (9th Cir. Or. 1997)


Inside Liability of Surety