Contract act

Rajeev Khanna (Querist) 19 December 2011 This query is : Resolved
Can a guarantor(surety) gives guarantee to the creditor for payment in event of default by the principal debtor after one year of the entering of contract between principal debtor and creditor:-means can agreement between creditor and surety be entered after one year of entering of contract between principal debtor and creditor:- we assume that during this one year there is no default by the principal debtor but default took place after one year and two months;-please provide citation in support

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Raj Kumar Makkad (Expert) 19 December 2011
If the surity is wilfully ready to bear the guarantee even after the expiry of one year of disbursement of loan amount by creditor in favour of loanee. Contract binds the surity. He should have thought each and every pros and cons prior to his becoming surity against a one year loan agreement executed between two persons.

In case loanee is not squaring his position qua his creditor, such surity is bound to make payment of all outstanding amount whether it relates to the period prior to his entry of thereafter.

ajay sethi (Expert) 19 December 2011
as surety you want to now wiggle out of your commitments . if the principal debtor is not making payment the surety would be liable . creditor can sue both . the liability of principal debtor is co extensive with that of gurantor

Devajyoti Barman (Expert) 19 December 2011
As a surety you are duty bound to fulfill the lacuna done by the borrower.
However you have one remedy and that is you can force the creditor to exhaust all remedies against the principal debtor first and then to turn to you to enforce the debt.

Guest (Expert) 20 December 2011
I feel there is some confusion in your mind. So, you need to first clear your position, whether you or your client was a guarantor (surety) from the initial stage or signed just as a witness on the bond/agreement? The position will be quite different in both the cases.

malipeddi jaggarao (Expert) 21 December 2011
What I understand from your query is : Mr.A is the borrower. Mr.B.is the lendor/creditor. Mr.X is the guarantor who has executed contract of guarantee after one year of loan. As Mr.Makkad saheb said above, this is a valid transaction provided the guarantor wilfully executed the contract and the creditor accepted the same. This Contract binds the surity for the amount mentioned in the guarantee agreement and further interest charged to the account. In your case, after two months of executing the guarantee agreement, there is a default by creditor. Whether the guarantee is valid? The guarantee is valid and guarantor is liable and his liability is co-extensive with that of principal debtor. The creditor can go against both the principal debtor and guarantor simultaneously or against either of two for recovery of entire dues as per the terms of agreement with the principal debtor after serving a notice.

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