KSLU Solved Question Papers
Contract II
Previous Year Question Paper with Solution
B.A. LL.B. (Five Years) · Sem 5
2021 Mar Examination
munotes.in
Mumbai
B.A. LL.B. (Five Years) Sem 5 Contract II 2021 Mar Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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Model answers written and edited by the munotes.in editorial desk.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2021 Mar examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2021 Mar examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2021 Mar examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
(a)Explain the rights of the Surety.[10]
Answer
For full marks, cover: why the law protects a surety; rights against the principal debtor: subrogation (section 140, Bank of Bihar) and the implied indemnity (section 145) with its illustrations; rights against the creditor: the benefit of securities (section 141, Amrit Lal Goverdhan Lalan, State Bank of Saurashtra) and the grounds of discharge (sections 133 to 139); rights against co-sureties (sections 138, 146 and 147); a table.
Introduction
A surety promises to pay another person's debt if that person defaults (section 126 of the Indian Contract Act 1872). He usually gains nothing from the bargain. The Act therefore gives him rights against three people: the principal debtor, the creditor and any co-sureties. These rights let him recover what he pays and protect him from a careless creditor.
A. Rights against the principal debtor
1. Right of subrogation (section 140). Once the guaranteed debt has become due, the surety may pay "all that he is liable for". He is then "invested with all the rights which the creditor had against the principal debtor". He steps into the creditor's place. He may sue the debtor as the creditor could have, and take over any security the creditor held.
Bank of Bihar Ltd. v. Damodar Prasad, AIR 1969 SC 297, explains the place of this right. The Supreme Court held that a surety cannot hold up the creditor until the debtor has been pursued. His protection lies in paying and then being subrogated to the creditor's rights under section 140.
2. Right to indemnity (section 145). "In every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety." The surety may recover "whatever sum he has rightfully paid", but nothing paid wrongfully. The illustrations show the line.
- In illustration (a), the surety defends a suit on reasonable grounds but loses. He may recover the debt and the costs.
- In illustration (b), he defends without reasonable grounds. He may recover the debt, but not the costs.
- In illustration (c), the surety pays the full Rs 2,000 although less rice was supplied. He recovers only the price of the rice actually supplied.
Section 140 needs full payment and gives the creditor's rights. Section 145 gives the surety his own claim for whatever he has rightly paid, even in part.
3. A right before payment. In equity, once the debt has fallen due, a surety may ask the court to make the debtor pay it. He need not wait to be sued first.
B. Rights against the creditor
4. Right to the benefit of securities (section 141). A surety is entitled to every security the creditor held against the debtor when the guarantee was given. It does not matter whether the surety knew of it. If the creditor loses that security, or parts with it without the surety's consent, the surety is discharged to the extent of its value.
Amrit Lal Goverdhan Lalan v. State Bank of Travancore, AIR 1968 SC 1432, applied this. Goods pledged to the bank for a cash credit account went missing through the bank's negligence. The shortage was valued at Rs 35,690. The surety was discharged to that extent.
State Bank of Saurashtra v. Chitranjan Rangnath Raja, AIR 1980 SC 1528, went further. A bank held tins of groundnut oil, kept under its own lock and key, as security for a cash credit loan. The tins were lost through its negligence. The Supreme Court held the surety discharged under sections 139 and 141 read together.
5. Rights of discharge. The surety may resist the creditor's claim where the creditor has done something the Act treats as releasing him. These grounds are:
- a change in the terms of the main contract without his consent (section 133);
- release of the debtor, or an act or omission of the creditor that discharges the debtor (section 134);
- a composition with, promise of time to, or promise not to sue the debtor (section 135);
- any act or omission of the creditor that impairs the surety's eventual remedy (section 139).
6. Protection against unfair dealing. A guarantee obtained by the creditor's misrepresentation, or by his silence on material facts, is invalid (sections 142 and 143).
C. Rights against co-sureties
7. Right to contribution (section 146). Where several persons guarantee the same debt, they share it equally between themselves, unless they agreed otherwise. A surety who pays more than his share may recover the excess from the others.
8. Sureties bound in different sums (section 147). They contribute equally, but only up to the limit of each one's obligation.
9. Release of one co-surety (section 138). If the creditor releases one co-surety, the others are not discharged. The released surety also remains liable to contribute to them.
Summary
| Against | Right | Section |
|---|---|---|
| Principal debtor | Subrogation after full payment | 140 |
| Principal debtor | Indemnity for sums rightly paid | 145 |
| Against | Right | Section |
|---|---|---|
| Creditor | Benefit of all securities | 141 |
| Creditor | Discharge for the creditor's conduct | 133 to 139 |
| Co-sureties | Equal contribution, or within each limit | 146, 147 |
| Co-sureties | Contribution from one released by the creditor | 138 |
Conclusion. A surety who pays steps into the creditor's shoes under section 140, as Bank of Bihar explains. He may also recover what he rightly paid from the debtor under section 145. Against the creditor he is entitled to every security, and is discharged if it is lost (section 141). Amrit Lal Goverdhan Lalan and State Bank of Saurashtra show this. Co-sureties must share the burden with him (sections 146 and 147).
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