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A bank lends P ₹5 lakh. X, Y and Z each guarantee the whole loan, with no agreement changing their…

The unpaid principal is ₹5 lakh minus ₹2 lakh, or ₹3 lakh. Under section 146 of the Indian Contract Act, 1872, the three co-sureties contribute equally in the absence of a…

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A bank lends P ₹5 lakh. X, Y and Z each guarantee the whole loan, with no agreement changing their shares as between themselves. P repays ₹2 lakh and defaults on the rest. Ignoring interest and costs, what is each co-surety’s share as between the three of them?

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Answer and explanation

Correct answer D

The unpaid principal is ₹5 lakh minus ₹2 lakh, or ₹3 lakh.

Under section 146 of the Indian Contract Act, 1872, the three co-sureties contribute equally in the absence of a contrary agreement. Each therefore bears ₹1 lakh as between themselves.

Option feedback

Option A

₹5 lakh is the original principal before P’s repayment.

Option B

₹3 lakh is the total unpaid principal to be divided among the three sureties.

Option C

₹2 lakh is the amount P has already repaid.

Option D

The remaining ₹3 lakh is divided equally among three co-sureties, making each share ₹1 lakh.

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