Contract act

  RJS Section 142-

Guarantee obtained by misrepresentation,invalid 

------any guarantee which has been obtained by means of misrepresentation made by the creditor 

Or with his knowledge and assent 

Concerning a material part of the transaction 

Is invalid.

Landmark decision 

London general omnibus company versus holoway 

Respondent was invited to give guarantee  for  an employee.the employee was suspended before due to embezzlement .but this fact was not disclosed before surety .so that employee was appointed again for that job . He had embezzled in office again .so surety was not liable in this case .

Section 143----

Any guarantee which the creditor has obtained which the creditor has obtained by means of keeping silence as to a material circumstance is valid .

Illustrations 

a.. A engages B as clerk to collect money for him .B fails to account for some of his receipt and A in consequence calls upon him to furnish security for his duly according.C gives his guarantee for B 's duly accounting A does not acquaint C with B's previous conduct B afterwards makes default .the guarantee is valid .

b.A guarantees to C payment for iron to be supplied by him to B to the amount of 2000.B and C have privately agreed that B should pay five rupees per tons beyond market price  such excess to be applied in liquidation of an old debt .this agreed is concealed from A .A is not liable as surety .

Section 144

Guarantee on contract that creditor shall not act on it until co surety joins -----

Where a person gives guarantee upon a contract that the creditor shall not act upon it until another person has joined in it as co surety 

The guarantee is not valid if that other person does not join .

Land mark judgement 

National provisional bank of England versus Brakeburry 

Respondent had signed on guarantee which had been signed by three others persons .but it was not signed by one person .but fabricated signature had been signed .so in this case surety was not liable due to these fabricated signature 

Section 145 

Implied promise to indemnify surety ------

In every contract of guarantee there is an imply promise by the principal debtor to indeminify the surety and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee,but no sums which he has paid wrongfully.

Illustrations 

a.B is indebted to C and A is surety for the debt .C demands payment from A and on his refusal sues him for the amount .A defends the suit ,having reasonable ground for doing so but he is compelled to pay the amount of debt with cost .he can recover from B the amount paid by him for costs .as well as the principal debt

b.C lends B a sum of money and A at the request of B accepts a bill of exchange drawn by B upon A to secure the amount.C the holder of the bill demands payment of it from A and on A 's refusal to pay sues him upon the bill A .not having reasonable ground for so doing ,defends the suit and has to pay the amount of the bill and costs ..he can recover from B the amount of the bill but not the sum  paid for costs as there was no real ground for defending the action .

C.A guarantee to C to extent of 2000 rupees payment for rice to be supplied by C to B .C supplies to B rice to a less amount than 2000 rupees but obtains from A payment of the sum of 2000 rupees in respect of the rice supplied A cannot recover from B more than the price of the rice supplied .

Section 146 

Co Sureties liable to contribute equally ---where two or more persons are co sureties for the same debt or duty either jointly or severally 

And whether under the same or different contracts 

And whether with  or without the knowledge of each other 

The co sureties in the absence of any contract to the contrary are liable as between themselves to each an  equal share of the whole debt or if that part of it which remains unpaid by the principal debtor .

Illustrations 

A.A ,B and C are sureties to D for sum of 3000 rupees lent to  E .E makes default in payment .A ,B and C are liable as between themselves to pay 1000/ rupees each .

B.A ,B and  C are sureties to D for the  sum of 1000  rupees lent to E .and there is a contract between A ,B and C that A is to be responsible to be the extent of one quarter ,B to the extent of one quarter and C to the extent of one half .E makes default in payment .As between the sureties .A is liable to pay 250 rupees .B is liable to pay 250 rupees .B 250 rupees and C 500 rupees