1.

Rights Against Creditor

In case of fidelity guarantee, the surety

can direct creditor to dismiss the employee whose honesty he has guaranteed , in the event of proved dishonesty of the employee. The creditors failure to do so will exonerate the surety from his liability.

1. Right to be relieved of liability: Before

the payment has been made, the surety can compel the principal debtor to relieve him from liability by paying off the debt. Before he can do so the debt must be ascertained .

2. Right to indemnity : The surety has a right to recover from the principal debtor the amounts which he has rightfully paid under the contrast of guarantee.

1. Right of contribution : Where a debt

has been guaranteed by more than 1 person, they are called as co-sureties . Sec.146 provides for a right of contribution between them.

2. Where the co-sureties have guaranteed the different sums ,they are bound under sec 127 to contribute equally subject to the limit fixed by the guarantee and not proportionately to the liability undertaken.

Discharge of surety by revocation

1. Revocation by surety by giving a notice : A continuing guarantee may at any time be revoked by the surety, as to future transaction, by notice to the creditor.

The deceased suretys estate will not be liable for any transaction entered into between the creditor and the principal debtor after the death of the surety, even if the creditor has no notice of the death.

Novation means substitution of new contract of guarantee for an old one either between the same parties or between one of the old parties and a new party, the consideration for the new contract being the mutual discharge of the old contract. The original contract of guarantee in such a case comes to an end.

1. BY RELEASE OR DISCHARGE OF PRINCIPAL

DEBTOR (SEC.134) The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequences of which is discharged of the principal debtor. But the surety is not discharged by operation of law.

2. BY CREDITOR COMPOUNDING WITH THE PRINCIPAL DEBTOR(SEC135)

A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue the principal debtor discharges the surety unless the surety assents to such contract.

3. BY CREDITORS ACT OR OMISSION IMPAIRING SURETYS EVENTUAL REMEDY(SEC139) If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.

1.

BY MISREPRESENTATION(SEC.142)

Where a creditor misrepresents to the surety regarding the material facts, the guarantee is invalid and therefore the surety is discharged .

2.BY CONCEALMENT(SEC.143) When a creditor obtains guarantee by concealing or keeping silent over the materials facts, the surety is discharged as the guarantee is invalid.

3.

BY FAILURE OF CONSIDERATION

Where in a contract of guarantee there is a failure of consideration as between the creditor and the principal debtor, the surety is discharged.