Rights of Surety Under the Indian Contract Act 1872

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RIGHTS OF SURETY In my part I am going to deal with what is the right of a surety. In what conditions he can be held liable and in what conditions he can discharge from his duties. Before coming to rights of surety I am again going to give the definition of surety. According to THE INDIAN CONTRACT ACT, 1872 in section 126 it is defined as “the person who gives the guarantee is called the ‘surety’.”

Rights of the surety

There are three rights provided to the surety according to the Indian contract act

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  1. Rights against principal debtor
  2. Right against creditor
  3. Right against the sureties.
  1. Right against principal debtor: According to the Indian contract act there are two to rights provided to the surety against the principal debtor.
  1. Right of Subrogation.
  2. Right to indemnity.

Right of subrogation: According to the section 140 of the Indian contract Act 1872 “Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.” When the surety has paid all that he is liable for he is invested with all the rights which the creditor had against the principal debtor.[1] The surety steps into the shoes of the creditor.[2] “If the liability of the surety is co-extensive with that of the principal debtor, his right is not less coextensive with that of the creditor after he satisfies the creditor`s debt”.[3] The surety may, therefore, sue the principal debtor in the rights of the creditor. The surety may, therefore, sue the principal debtor in the rights of the creditor. For example in Iron Ore Co Re:[4] Right to indemnity: According to section 145 of the Indian Contract Act “ in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but no sums which he has paid wrongfully.” Thus in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety.[5] The rights enables the surety to recover from the principal debtor whatever some sum he rightfully paid under the guarantee.[6] Surety`s right of indemnity is only in respect of the payments, rightfully made by him.[7]

  1. Right against creditor: Surety has the following rights against the creditor which are:
  1. Right to securities.

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