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Rights and Discharge of Surety
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Rights and Discharge of Surety
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Rights and Discharge of SuretyA contract of guarantee refers to a contract to perform the promise or discharge
the liability of a third person in case of any default by him. Surety is the person
giving the guarantee. The person for whom the guarantee is given is the Principle
Debtor. The person to whom the surety gives the guarantee is the Creditor. A
guarantee may be oral or in writing. Here we will discuss the Discharge and
Rights of Surety.
Discharge and Rights of Surety
A contract of guarantee shall also satisfy all the necessary conditions or elements
of a valid contract. As per section 127, anything is done or any promise made for
the benefit of the principal debtor provides sufficient consideration to the surety
for giving the guarantee to the creditor.
For example, Bharat asks Anil to sell goods to him on credit and deliver them.
Anil agrees to it on a condition that Charu will guarantee the payment of the
price of the goods. Charu guarantees the payment in consideration of Anil’s
promise to deliver the goods. This is sufficient consideration for Charu’s or
Surety’s promise.
Rights of a Surety
A surety has the following rights:
, 1. Rights against the Creditor
As per section 141, a surety is eligible to the benefit of every security which the
creditor has against the principal debtor. This holds true even if at the time of
entering into the contract of guarantee the surety was unaware of the existence of
such a security.
Also, when the creditor losses or parts with such security without the consent of
the surety, this discharges the surety to the extent of the value of such security.
2. Rights against the Principal Debtor
Once the surety discharges the debt, he obtains the rights of a creditor against the
principal debtor. He can now sue the principal debtor for the amount of debt paid
by him to the creditor due to the default of the principal debtor.
In a case where the principal debtor on discovering that the debt has become due,
starts disposing of his properties in order to prevent seizure by the surety, the
surety can compel the debtor to pay the debt and discharge him from his liability
to pay.
3. Surety’s rights against the co-sureties
When a surety pays more than his share to the creditor, he has a right of
contribution from the co-sureties, who are equally liable to pay. For example,
Anthony, Barkha, and Chaya are the co-sureties to David for a sum of ₹30000
lent to Erwin who made default in payment.
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