Rights of surety in business law

1. business law
assignment
Name : Esakiammal
Roll number : 18UR02

2. welcome

3. 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.

4. Rights of a Surety
A surety has the following rights:
 1. Rights against the Creditor
 2. Rights against the Principal Debtor
 3. Surety’s rights against the co-sureties

5. 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.

6. 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.

7. 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.
 Thus, Anthony, Barkha, and Chaya are liable to pay ₹10000 each as
between them. So, in this case, if anyone of them pays more than
₹10000, he can claim the excess from the other two co-sureties so as
to reduce his payment to ₹10000 only. However, if one of the co-
sureties becomes insolvent, the other co-sureties shall contribute his
share equally.

8. Thank you