Rights of Surety against the Creditor

1. Ask the creditor to sue the debtor: On the guaranteed debt having fallen due for payment, the surety may ask the creditor to sue the debtor to collect the due amount, but he cannot compel him to do so. But he must then indemnify the creditor against any risk or delay arising as a consequence.

2. Require the creditor to terminate the debtor’s services: In the case of the fidelity guarantee, if the principal debtor’s dishonesty comes to light, the surety can require the creditor to terminate the principal debtor’s services so as to save him from further loss.

3. Claim to any set off: The surety on being called upon to pay, can claim any set-off to which the principal debtor is entitled from the creditor.

4. Access to the securities of the debtor with the creditor: The surety can, after paying the guaranteed debt, compel the creditor to assign to him all the securities taken by the creditor either before or at the time of the contract of guarantee, whether the surety was aware of them or not.

5. Right to Share Reduction: On debtor’s insolvency the surety is entitled to claim the proportionate reduction of his liability by the amount of dividend claimed by the creditor (from the Official Receiver of the Principal debtor). Similarly, debtor’s debt obligation is scaled down by subsequent legislation; the creditor is entitled to claim proportionate reduction in his liability.

 What are the rights and duties of an agent?

 How is an agency terminated?

 How is agency created and terminated?

 Rights of Surety Against the Principal Debtor

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