Question 3
Surety and his rights; lost bill of lading and the indemnity for a duplicate
18.75 marks
- Time to write
- About 38 minutes
From an older CBCS paper
Question
Question 3 · 18.75 marksQ.3. Define the term “Surety”, and Give an example to explain it. Explain the rights that the Surety has.
A has lost his bill of lading, worth 2 lakh, and applies to the carrier for a duplicate one. Will the carrier issue one to him? To get a duplicate bill of lading, what will he have to furnish? Explain giving reasons.
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Will the carrier…?A case problem: state the rule and its section, apply it to these facts, then answer in one line (yes or no, and why).
- exampleExamples are asked for: one short example with each point.
What the paper leaves open
The paper prints no mark per question (any four of six, equal marks, 75 in all); each question is reckoned here at 18.75 marks.
Write it in this order
- Read the facts; underline who did what, and the exact question 2 min
- 1 Surety defined, with example 4 marks 7 min
- 2 Rights of the surety 7 marks 13 min
- 3 Duplicate bill of lading: indemnity 7.8 marks 14 min
- Check: section named, answer stated in one line 2 min
Short on time? Trim steps 1–3 evenly rather than skip one: each is capped at its own marks.
Try it first. About 38 minutes for 18.75 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
Surety. “A contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default; the person who gives the guarantee is” the surety, the person in respect of whose default it is given is the principal debtor, and the person to whom it is given is the creditor (s. 126). Example (our own): Riya borrows ₹6,00,000 from a bank for her MBA, and her father signs a guarantee promising to repay the bank if she does not. The bank is the creditor, Riya the principal debtor and her father the surety.
1Hariram pays the lender what the borrower owed—and steps into the lender's shoes.
Right of subrogationHe steps into the creditor's shoes.
2Receipt in hand, he knocks on the borrower's door to recover every rupee he paid.
Right to indemnityRecover from him any sum he has rightfully paid under the guarantee.
3Two sureties, one debt: across the table they split the burden equally.
Right to contributionThey are liable, in the absence of a contract to the contrary, to contribute equally to the whole debt or the unpaid part of it.
- Against the creditor: he is entitled to the benefit of every security the creditor had against the principal debtor when the guarantee was given; if the creditor loses or parts with such security without his consent, he is discharged to the extent of its value (s. 141).
- Against co-sureties: co-sureties for the same debt contribute equally, unless otherwise agreed.
- Against the principal debtor: on paying the guaranteed debt, he is invested with all the rights the creditor had against the principal debtor (subrogation, s. 140); and he is entitled to be indemnified by the principal debtor for whatever he has rightfully paid under the guarantee (s. 145).
The lost bill of lading. A bill of lading is the document of title to the goods, so a carrier that issues a second copy runs the risk that the lost original turns up in someone else's hands and it has to answer to two holders. The carrier will therefore issue A a duplicate for the goods worth 2 lakh only if A furnishes an indemnity: a promise to save the carrier from any loss that issuing the duplicate may cause, should the original be produced by another person. Such a promise is a contract of indemnity, in which one party undertakes to protect the other against loss, whether caused by the promisor's own conduct or by anyone else's (s. 124).
Where the 18.75 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Surety defined, with example | 4 |
| 2 | Rights of the surety | 7 |
| 3 | Duplicate bill of lading: indemnity | 7.75 |
| Total | 18.75 |
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