1   Types of Guarantee are as below:


  • Absolute and Conditional Guarantee:

Unconditionally a promise to pay the debt, on the default of the principal debtor, is called absolute guarantee but, if some contingency arises there is a conditional guarantee.


  • General and Special Guarantee:

The guarantee that can be accepted by general people is called general guarantee and accepted by a particular person is called the special guarantee.


  • Limited and unlimited Guarantee:

If there is limitation of time and amount under an agreement is called the limited guarantee, whereas there is not any limitation of time and amount is called the unlimited guarantee.


  • Prospective and Retrospective Guarantee:

Guarantee is given for future transaction is called prospective guarantee and Guarantee is given for past or existing actions is called retrospective guarantee.


  • Specific and Continuing Guarantee:

Guarantee is extended to a single transaction or debt is called a specific guarantee and if a guarantee extends to a series of transactions continuously is called a continuing guarantee.


·        Features of continuing guarantee:


  • Continuing Guarantee is not ended by the first advance.


  • It is always be revoked by a notice to the creditor.


  • A revocation of continuing Guarantee is possible for future transactions.


  • Death of the surety terminates the contract.


·        Revocation of the continuing guarantee:


  • A Surety may revoke a continuing guarantee at any time by a notice.


  • The death of the surety automatically terminates the contract of guarantee. But except otherwise agreed, the liability of the surety for the previous transactions is not discharged.


  • By the variation in the terms of the contract without the consent of surety.


  • By novation of the contract.


  • By discharge of the principal debtors.


  • By loss of security

Rights and Liability of Surety:


  •  Rights of Surety:


a.  Rights against the creditor:


  • Rights to demand security with creditors.


  • Right to claim set-off. Set-off means to counter a claim. If the creditor lost or loss the security the surety can make a counter claim.


  • Right of subrogation: It means right to substitution. After the payment of all the guaranteed debt to the creditor, Surety substitutes the status of creditor.


  • Right to claim Equities: On the full payment of guaranteed debt, the security is entitled to all equities. (With natural increment and claim)


b. Rights of a surety against the Principal debtor: After the payment of the guaranteed debt, the surety stands against the principal debtor. So, there are some rights for surety against the principal debtor established by law which is as below:


  • Right to be relived from liability: Surety may compel to principal debtor to pay the loan and get rid of him from the liability.


  • Right to claim indemnity: Surety has the right to claim of the legal expenses, loan, interest, cost of suits, etc.


  • Right to subrogation: Subrogation means to be placed on the seat of the creditor. Such a right of surety can be exercised on the full payment of the guaranteed debt.


c. Rights against co-sureties: If there are more people become the sureties under a single agreement of contract or single transaction of loan all are responsible to pay the loan respectively. Except otherwise, there is different terms and conditions under the agreement, liability of co-sureties is equal. If they bound for different-different sum, they are compelled to pay their respective liabilities. In case one co-surety paid entire liability but other co- sureties do not make payment or fails to pay their respective liability in this situation aggrieved co-surety has the right to sue against the other co-sureties to recover his paid

d. Rights to recover the actual amount paid: Surety has the right to recover the entire payment from the principal He can recover only the amount actually paid by him but not equal to the guarantee in case surety did not pay total sum of guarantee.

  • Liabilities of Surety


  1. Liability co-extensive as the principal debtor: The surety's liabilities is same as that the principal debtor. Hence, in the absence of a contract to the contrary, liability of the surety is co-extensive with or similar to that of the principal debtor and he remains responsible until the principal debtor becomes free from his liability.
  2. Secondary liability of surety: Firstly, the principal debtor must be paid his all liability by himself. Where the principal debtor performs his duty by himself nothing remains any liability of surety. If principal debtor does not perform his liability, then after, liability of surety will So, it can be said that surety's liability is secondary.
  3. Contingent nature of liability: The contract of guarantee seems conditional or contingent nature of contract. After the failure of principal debtor, the obligations of surety will begin. So, it depends on the future uncertain or collateral event.
  4. Limited nature of liability: It limits the liability of the surety.
  5. Liability of primary nature:


  • If the principal debtor is the minor at that time surety will be liable as the primary nature.
  • The principal debtor becomes  insolvent.
  • Operation of law occurs death, insolvent/ insanity principal debtor can discharge form the liabilities but not surety. But all most depends on the agreement of the contract.


  • 5.2.3 Discharge of Surety from the liabilities


a. By performance

b. Revocation of Surety


  • By notice


  • Death


  • Novation (Renewal)


c. Discharge by variation in terms


d. By discharge of principal debtor


e. By release of principal debtor


f. By compromise of creditor and principal debtor


g. By loss of security


h. By the discharge of one of the surety


i. By damaging surety's rights.


j. By expiry the time etc.