A surety is a person who promises to pay the debt of another person (the principal debtor) if the principal debtor does not pay. In a banking contract of guarantee, the surety is usually a friend or family member of the principal debtor.
The surety has a right to claim his dues from the principal debtor after paying the debt to the creditor. This right is called the right of subrogation.
The right of subrogation means that the surety steps into the shoes of the creditor and acquires all the rights that the creditor had against the principal debtor. This includes the right to recover the debt, as well as any interest and other charges that may be due.
To claim his dues from the principal debtor, the surety must first pay the debt to the creditor. The surety can then sue the principal debtor for the amount of the debt, plus interest and other charges.
The surety may also be able to claim the costs of legal fees that they incurred in paying the debt to the creditor.
MCQs on Surety can Claim His Dues from the Principal Debtor in Banking Contracts of Guarantee
- Which of the following is not a right of the surety?
- Right to be reimbursed by the principal debtor.
- Right to claim subrogation from the creditor.
- Right to claim indemnity from the creditor.
- Right to sue the creditor for contribution from the other co-sureties.
- Answer: Right to sue the creditor for contribution from the other co-sureties. The surety can only claim contribution from the other co-sureties if they have been released by the creditor.
- The surety can claim his dues from the principal debtor after paying the debt to the creditor. Is this always true?
- No, this is not always true. The surety may not be able to claim his dues from the principal debtor if the principal debtor is insolvent.
- The surety may also be able to claim the costs of legal fees that they incurred in paying the debt to the creditor. Is this always true?
- No, this is not always true. The surety may only be able to claim the costs of legal fees if they were reasonable and necessary.
- The surety can only claim his dues from the principal debtor if the surety has paid the debt to the creditor in full. Is this always true?
- No, this is not always true. The surety may be able to claim a partial payment from the principal debtor even if they have not paid the debt in full.
- The surety can only claim his dues from the principal debtor within a certain period of time. Is this always true?
- Yes, this is always true. The surety must claim his dues from the principal debtor within a reasonable time after paying the debt to the creditor.