contract of guarantee

Surety's liability is co-extensive that of the Principal Debtor.

Dear querist,

If original contract is void in that case borrower and gurantor both are not liable to repay under contract.

Regards,

Normally the Surety is liable even if the Principal Debtor is dead. But in your case if it is void it cannot be enforced against the surety.

What are the facts? What is the context? Please do not post riddles. Tkis platform is meant for realtime issues.

Hi,

Under Section 128 of the Indian Contract Act (ICA), the liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. In case of a contract of guarantee, the primary liability is that of the principal debtor! Surety’s liability is only secondary i.e. it arises only when the principal debtor fails!

If the principal debtor is not liable on the principal debt for some reason(Void Contracts), the surety is also not liable. Also, if the principal debtor is discharged of his debt by the creditor for some reason, the surety is also discharged.

Therefore, a surety’s liability depends upon the terms of his contract and cannot be made liable for more than he has undertaken.

Also, where the principal debtor cannot be held liable for any payment due to any defect in documents, then surety is also not responsible for such payment.

Section 129 of the ICA states that a guarantee which extends to a series of transactions is called a ‘continuing guarantee’

The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions. The liability for any transaction that took place prior to the death of the surety will be borne by his heirs.

Only a continuing guarantee may be revoked by the death of Surety. Therefore, in the facts, it is important to first figure if the guarantee is of a continuing nature or not!

I hope this solves your query.

Regards,

Archit.