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Contracts Act 1950 [Act 136]

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

Where a person gives a 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.

98 Implied promise to indemnify surety

In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee, but not 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 grounds for doing so, but is compelled to pay the amount of the debt with costs. 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 grounds 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 guarantees to C, to the extent of RM2,000, payment for rice to be supplied by C to B. C supplies to B rice to a less amount than RM2,000, but obtains from A payment of the sum of RM2,000 in respect of the rice supplied. A cannot recover from B more than the price of the rice actually supplied.


99 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 pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.

ILLUSTRATIONS

(a) A, B and C are sureties to D for the sum of RM3,000 lent to E. E makes default in payment. A, B and C are liable, as between themselves, to pay RM1,000 each.

(b) A, B and C are sureties to D for the sum of RM1,000 lent to E, and there is a contract between A, B and C that A is to be responsible to the extent of onequarter, 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 RM250, B RM250 and C RM500.


100 Liability of co-sureties bound in different sums

Co-sureties who are bound in different sums are liable to pay equally as far as the limits of their respective obligations permit.

ILLUSTRATIONS

(a) A, B and C, as sureties for D, enter into three several bonds, each in a different penalty-namely, A in the penalty of RM10,000, B in that of RM20,000, C in that of RM40,000, conditioned for D's duly accounting to E. D makes default to the extent of RM30,000. A, B and C are each liable to pay RM10,000.

(b) A, B and C, as sureties for D enter into three several bonds, each in a different penalty-namely, A in the penalty of RM10,000, B in that of RM20,000, C in that of RM40,000, conditioned for D's duly accounting to E. D makes default to the extent of RM40,000. A is liable to pay RM10,000, and B and C RM15,000.

(c) A, B and C, as sureties for D, enter into three several bonds, each in a different penalty-namely, A in the penalty of RM10,000, B in that of RM20,000, C in that of RM40,000, conditioned for D's duly accounting to E. D makes default to the extent of RM70,000. A, B and C have to pay each the full penalty of his bond.




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