Posted February 1, 2014 by advocateguru in Learning Centre

Extent of Surety’s liability

The liability of the surety is co-extensive with that of the principal debtor unless the contract otherwise provides (Section 128). A creditor is not found to proceed against the principal debtor. He can sue the surety without sueing the principal debtor. As soon as the debtor has made default in payment of the debt, the surety is immediately liable. But until default the creditor cannot call upon the surety to pay. In this sense, the nature of the surety’s liability is secondary.

For example: A guarantees to B the payment of a bill exchange by C, the acceptor. The bill is dishonoured by C. A is liable not only for the amount of the bill but also for any interest and charges which may have become due on it.

Section 128 only explains the quantum of a surety’s obligation when terms of the contract do not limit it. Conversely it doesn’t follow that the surety can never be liable when the principal debtor cannot be held liable. Thus, a surety is not discharged from liability by the mere fact that the contract between the principal debtor and creditor was voidable at the option of the former, and was avoided by the former. Where the agreement between the principal debtor and creditor is void as for example in the case of minority of principal debtor, the surety is liable as a principal debtor; for in such cases the contract of the so-called surety is not collateral, but a principal contract (Kashiba v. Shripat (1894) 19 Born. 697)