Securities are classified into real and personal.
Real security gives the creditor certain rights over property which has been appropriated to meet the debt. This takes the form of a right in rem over specific property to the satisfaction of a particular debt so that the debt is a primary charge on the property . The lender whose right is protected by real security is entitled to take the security for the discharge of his debt.
Person security – personal security gives the creditor a secondary contractual action against the surety should the principal debtor defaults . It gives the.creditor no cliam upon any particular thing that a cliam against a particular person who assumes liability as surety for the principal debtor.
Personal security or suretyship exists in two forms namely: by guarantee or by indemnity.
A contract of guarantee assures the creditor of the guarantor’s secondary liability in the event of the inability of the principal debtor to meet his financial obligations even after adjudged liable by the court.
In this case , the creditor would have to proceed first against the principal debtor by action in court and it is only where the latter’s assets are insufficient to meet the financial obligations that the guarantor is proceeded against.
A contact of indemnity assures the creditor of the primary liability of the indemnifier upon failure of the principal debtor to fulfil his obligation under the loan agreement. In this case , the creditor is not obliged in law to proceed against the principal debtor first before suing the indemnifier under the contract of indemnity- I.O.Smith