Case 1: Rights of a Surety (Co-Sureties & Contribution)
Scenario:
A, B, and C jointly acted as sureties for a loan taken by D from a bank.
D defaulted, and the bank forced A to pay the entire amount.
A then sought contribution from B and C.
Legal Principle Applied:
Section 146 of the Indian Contract Act, 1872: If multiple sureties have guaranteed a debt, they must share the liability equally unless agreed otherwise.
Outcome:
The court ruled that B and C must reimburse A for their share of the loan repayment.
This case confirms that a surety can claim contribution from co-sureties if they have paid more than their share.
Case 2: Bank Guarantee & Performance Guarantee
Scenario:
A construction company (X Ltd.) obtained a bank guarantee to ensure completion of a government project.
The company failed to complete the project within the deadline.
The government demanded payment from the bank, as per the guarantee.
Legal Principle Applied:
A bank guarantee is a legally binding promise.
If the principal party (X Ltd.) defaults, the bank is liable to pay the beneficiary (government).
Outcome:
The bank was forced to pay the guarantee amount.
This case shows that a bank guarantee is an enforceable security for contract performance.
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