Please explain the role of surety and the degree of his liability.
Section 126 of the Indian Contract Act states about contract of guarantee, surety, principal debtor and creditor. The person who gives the guarantee is called the surety and on whose default the guarantee is given is called the principal debtor and the person to whom the guarantee is given is called the creditor. If a promise is made for the benefit of principal debtor is sufficient consideration to surety for giving guarantee to him/her. Surety is the person who promises to the creditor that in case the debtor makes a default in making payment surety will make the payment to creditor here surety is undertaking the promise that he will pay the money defaulted and fulfill the promise. If someone requests for surety only it is given, i.e. a debtor’s request surety is given to the creditor. Surety of a minor cannot be considered for a simple reason that he/she is not competent to contract.
Section 128 of the Act states the liability of the surety. In Industrial Finance Corporation of India Ltd. v. Cannonore Spinning & Weaving Mills Ltd, (12 April, 2002) states that contract of guarantee does not provide any contra note regarding the liability of the surety which can create an exception within the meaning of Section 128.
Section 141 of the Indian Contract Act states that when a contract of suretyship is entered surety is entitled to benefit every security that the creditor has against the principal debtor. Surety will be liable even though the principal’s contract is void. Liability of sureties and principal debtor is co-extensive. A continuing guarantee can be revoked by the surety in relation to future transactions by notice to the creditor. Revocation can also occur with the death of surety. It is explained under Section 130, 131 of the Act. If there is any changes that happens to the original contract between the principal debtor and creditor then surety is automatically discharged. The surety is also discharged if the principal debtor is released. If one co-surety is discharged it does not discharge/set free the other surety from his responsibility. Surety is entitled to recover from principal debtor the sums that he has rightfully paid under the guarantee but not entitled to sums that he has paid wrongly.
by Sushma Javare.