According to provisions of the Indian Contract Act, 1872, define the following terms with reference to contract of guarantee:
(i) Nature and extent of Surety's Liability
(ii) Discharge of a Contract of Surety by Invalidation of the Contract of Guarantee.
i) Nature and extent of Surety’s Liability [Section 128 of the Indian Contract Act, 1872]
ii) Discharge of a contract of Surety by the invalidation of the contract of guarantee.
(a) Guarantee obtained by misrepresentation [Section 142]: Any guarantee which has been obtained by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a material part of the transaction, is invalid.
(b) Guarantee obtained by concealment [Section 143]: Any guarantee which the creditor has obtained by means of keeping silence as to material circumstances is invalid.
(c) Guarantee on contract that creditor shall not act on it until co-surety joins (Section 144): Where a person gives a guarantee upon a contract that the creditor shall not act upon it until another person has joined in it as co-surety, the guarantee is not valid if that other person does not join.
(A) The liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract.
(B) Liability of surety is of secondary nature as he is liable only on default of principal debtor.
(c) Where a debtor cannot be held liable on account of any defect in the document, the liability of the surety also ceases.
(D) A creditor may choose to proceed against a surety first, unless there is an agreement to the contrary.
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