Skip to content
Studycaller
Notes

CA Foundation doubt

What are the surety's right of subrogation and the implied promise to indemnify the surety?

Rights of surety

Rights of surety 1) what is rights of subrogation 2) what is implied promise to indemnify surety Explain with example

Asked by Himesh··1 answer

1 reply

  1. BrunoAI answerAI first answer — verify with your teacher

    1. Right of subrogation (Sec. 140, Indian Contract Act, 1872): once the surety pays the guaranteed debt or performs the promise, he steps into the creditor's shoes. He gets all the rights the creditor had against the principal debtor. 2. Implied promise to indemnify surety (Sec. 145): every contract of guarantee carries an implied promise by the principal debtor to repay the surety. He can recover any sum he rightfully paid, but not any sum he paid wrongfully. Example: A borrows Rs 1,00,000 from a bank and pledges gold. B is the surety. A defaults and B pays the bank. - Subrogation: B can now sue A and claim the pledged gold, just as the bank could. - Indemnity: B can recover the Rs 1,00,000 from A. But if B defended the bank's suit without reasonable cause, he cannot recover those costs from A.

Related questions

When does a surety get the right of subrogation?

Only after the surety pays the guaranteed debt or performs what was guaranteed. Then the surety steps into the creditor's position against the principal debtor.

Can a surety recover every amount paid to the creditor?

No. The surety can recover only sums paid rightfully under the guarantee. Amounts paid wrongfully, such as costs of defending a suit without reasonable cause, cannot be recovered.

Does the surety also get securities held by the creditor?

Yes. Through subrogation the surety is entitled to the benefit of securities the creditor held against the principal debtor, such as pledged goods.

Have a doubt like this, or know the answer?

Ask and reply in the free Studycaller app. Students and Bruno answer fast.

Add your own doubtReply to this doubt
Get a CA mentor

Related doubts

  • CA FoundationIndian Contract Act 1872 - discharge of surety

    When is a surety not discharged, and how is a surety discharged by a creditor's act impairing his eventual

    BrunoAI answer

    Both are rules on discharge of surety under the Indian Contract Act, 1872. 1. Sec. 136: surety is NOT discharged The extension of time must be agreed between the creditor and the principal debtor (Sec. 135) to discharge the surety. A deal with an outsider does not change the surety's position. Example: A owes C Rs 1 lakh and S is surety. C agrees with M, a friend of A, to give A 3 more months. S is not discharged. 2. Sec. 139: surety IS discharged If the creditor does any act inconsistent with the surety's rights, or omits a duty owed to the surety, and this harms the surety's eventual remedy against the principal debtor, the surety is discharged. Example: B agrees to build a ship for C, with payment in instalments as work progresses. A is surety for B's performance. Without A's knowledge, C pays B the last two instalments in advance. A is discharged, because his security over the unpaid money is lost. Section numbers are as per the current ICAI study material. Do check the latest edition for your attempt.

    Read full answer →

    1 answer 13 Nov 2026

  • CA FoundationBusiness Laws - important sections for revision

    What are the most important sections of the Companies Act, Sale of Goods Act, Partnership Act and Contract

    BrunoAI answer

    Great revision plan! Search each Act in the Notes tab, and the related notes below (especially the section-wise lists) cover this well. Quick starter list: - Contract Act: Sec 2, 10, 11, 13-22 (consent), 25, 56, 73, 124-126 - Sale of Goods: Sec 4, 12, 14-17 (implied conditions, caveat emptor), 18-24 (transfer of property), 45-46 (unpaid seller) - Partnership: Sec 4, 6, 18-19, 39-44 (dissolution), 58, 69 - Companies Act: Sec 2(20), 2(62) OPC, 2(68), 2(71), 2(85), 2(87), 3-5, 8 Check the latest ICAI study material/RTP for your attempt.

    Read full answer →

    1 answer 13 Nov 2026

  • CA FoundationGroup MCQ practice for CA Foundation

    How can I practise MCQs together with other students on Studycaller?

    BrunoAI answer

    Great idea, practising MCQs with friends makes revision stick! - Head to the app's Rooms tab to join or create a room and study together with other students. - Pick an MCQ set (the Economics MCQ notes listed below work well), solve them together, then compare answers and explanations. - Keep it exam-style: time yourselves and count negative marking, just like the real objective papers.

    Read full answer →

    1 answer 13 Nov 2026

  • CA FoundationIndian Contract Act 1872 - agent exceeding authority

    Will Z succeed against X when agent Y exceeds his ₹10 lakh limit, and does Section 228 or 233 apply?

    BrunoAI answer

    Section 228 applies here, not Section 233. Z will not succeed against X. 1. Section 227: if the authorised part can be separated from the excess, the principal is bound only for the authorised part. 2. Section 228: if they cannot be separated, the principal is not bound at all. 3. Here Y bought a single item for ₹12 lakhs against a ₹10 lakh limit. One item cannot be split into ₹10 lakh plus ₹2 lakh, so X is not liable. The discount or benefit to X does not change this. 4. Z can recover from Y, who exceeded his authority. Z could also claim from X if X ratifies the purchase. Section 233 applies only where the agent is personally liable. Then the third party may sue the agent, the principal, or both. That is not the issue here.

    Read full answer →

    1 answer 12 Nov 2026

See all CA Foundation doubts

Free app · 5 lakh+ learners

Ask your doubt in the Studycaller app

Read full notes, ask doubts, follow toppers and track your study hours — free on Android and iPhone.

Get it onGoogle PlayDownload on theApp Store