Rights of Surety
Rights of Surety
1. Rights against the Creditor
a. Right to securities : The surety is entitled to demand from the creditor, at the time of payment, all the securities which the creditor may have against the principal debtor. Creditor must handover to the surety the securities in the same condition as they formerly stood in his hand. If the creditor loss or without consent of the surety, parts with such security, the surety is discharged to the extent of the value of security.
b. Right to Exoneration (Pity, pardon) In the case of fidelity guarantee the surety can call upon the creditor or the employer to dismiss the employee whose honesty he has guaranteed in the event of proved dishonesty of the servant. He may also file a suit for a declaration that the principal debtor is the person pay the amount. In such a case the surety is exonerated.
c. Right to Share Reduction If there are more than one surety exists for the same principal debtor. If any default made by the principal, all the sureties have the rights to divide the default to the extent of their guarantee. d. Right to set off:
Set off means to counter a claim.
The surety is also entitled to the benefit of any set of or counter claim, which the principal debtor might possess against the creditor in respect of the same transaction. For example if the creditor owes the debtor something, or has his hand something belonging to the debtor for which the debtor could have counter claimed , the surety can also put that counter claim.
2. Rights against principal debtor
a. Right to subrogation When the surety has paid the guaranteed debt on the default of the principal debtor, he become the creditor and will be able to exercise as against the principal debtor all these rights and remedies which could be exercised by the creditor.
b. Right to indemnity In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety and the surety is entitled to demand from the principal debtor whatever he has paid under the guarantee.
3. Right against Co-sureties