Suretyship is a contract by which the surety binds himself as liable towards the creditor of another person gratuitously, or for remuneration, in the event where the person in whose favor suretyship is granted fails to perform the obligation in whole or in part. Suretyship is an accessory obligation (dependent upon the obligation of the principal debtor for which it has been entered into). Suretyship shall terminate upon either the extinguishment of the principal obligation, or it having been declared void.
Suretyship may be contracted for both an already existing obligation and for those which will arise in the future, but in any event, suretyship may be applied only for the performance of a sufficiently specified obligation. Suretyship may also be contracted for a part of the principal obligation. Suretyship may not be contracted for an amount in excess of that owed by the debtor. Suretyship may not be contracted under any other onerous conditions. Where the sum secured by suretyship extends beyond the limits of the debt for which it was contracted, it must be diminished up to the amount of the debt.
If the debtor fails to perform the obligation, both the debtor and the surety are liable as solidary debtors towards the creditor for the fulfilment of this obligation, unless otherwise provided for by the contract of suretyship. This is in contrast to the obligation of a guarantor, which is subsidiary and limited to the amount for which the guarantee was issued.
A suretyship contracted for a determinate period, or with a view to performing an obligation with a fixed term, is terminated if the creditor does not bring an action against the surety within three months from the day on which the contract of suretyship, or the time-limit of performance of the obligation, expires.
Where suretyship by which the future obligation is secured is contracted for a fixed period, it terminates on the day of maturity of the time-limit of suretyship if the obligation did not arise before the expiration of this time-limit.
In absence of any agreement to the contrary, where the suretyship is contracted for an indeterminate period, or where the time-limit of performance of the obligation is not indicated, nor determined by the moment of demand for performance, the suretyship is terminated upon the expiry of two years from the day on which the contract of suretyship was formed if the creditor does not bring an action against the surety within this time-limit.
Where a future obligation is secured by the suretyship contracted for an indeterminate period, the surety may, by his unilateral notice, dissolve it upon expiry of three years from its contraction if, during the three years, the obligation has not become exigible. The surety must immediately inform, in writing, the debtor and the creditor of the dissolution of suretyship.
The Supreme Court of Lithuania indicated that, in case the suretyship is contracted for a period of absolute fulfilment of the obligation, and this clause is clearly stated in the contract, suretyship does not end if the creditor does not bring an action against the surety within three months, nor upon the expiry of two years from the day on which the contract of suretyship was formed.