Rights of surety on payment or performance.— Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the principal debtor.
Rights of surety on payment or performance
When the main borrower (principal debtor) fails to pay a loan or does not do what they promised, the guarantor (surety) has to pay or complete the work.
Once the guarantor pays the full amount or performs the duty, they get all the rights that the lender (creditor) had against the borrower. This means the guarantor can now recover the money from the borrower.
Example
(a) R takes a loan from a bank, and S becomes his guarantor. If R does not repay the loan, S will have to pay the bank. After S pays the full amount, he gets the right to collect that money from R. Now S can legally ask R to repay him.
(b) A rents a shop, and his friend R becomes guarantor. A stops paying rent. The owner asks R to pay. R pays the pending rent. Now R can ask A to repay him that amount.
(c) A company promises to complete a construction project, and another company gives a guarantee. The first company fails to finish the work. The guarantor company completes the work. Now the guarantor company can recover the cost from the first company.