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Section 147: Liability of co-sureties bound in different sums

Indian Contract Act • Official Statutory Text & Practice Guide

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Act 1872
Section 146 All 266 Sections of Indian Contract Act Section 148

Legal Commentary & Landmark Judgments: Section 147

Section 147 of the Indian Contract Act, 1872 regulates the apportionment of liability among co-sureties who are bound in different monetary sums, enacting the rule of 'equal contribution up to individual limits' rather than proportionate liability. It establishes an egalitarian principle where all co-sureties contribute equally until the monetary ceiling of each surety's specific bond or undertaking is reached.

  • Equal Sharing Up to Respective Limits: Co-sureties bound in unequal sums do not pay in proportion to their maximum limits; they pay equally dollar-for-dollar until the lowest ceiling is exhausted, and the remaining liability is then divided equally among the remaining sureties whose limits have not been reached.
  • Maximum Obligation Cap: No surety can be compelled to contribute any sum exceeding the specific maximum financial ceiling fixed in his contract of guarantee.
  • Statutory Illustration Formulas: The operational formula follows the statutory illustrations: if debt is ₹30,000 and A, B, C are bound in ₹10,000, ₹20,000, and ₹40,000 respectively, each pays ₹10,000; if debt is ₹40,000, A pays ₹10,000, and B and C each pay ₹15,000.
Key Landmark Precedents:
  • Ellesmere Brewery Co. v. Cooper [1896] 1 QB 75: Celebrated English authority explaining that where sureties execute a bond with differing liability limits, their liability inter se is governed by equal contribution up to those limits, and altering the execution terms of one invalidates the bond for the others.
  • Pendlebury v. Walker (1841) 4 Y&C Ex 424: Recognized the equitable principle codified in Section 147 that differential limits do not convert the relationship into proportionate sharing, but rather equal sharing capped by the agreed upper ceiling of liability.
Courtroom Practice & Strategic Litigation Guidance:

In structuring syndication guarantees or multi-promoter corporate credit, draft explicit clauses if the commercial intent is proportionate sharing (e.g. pro-rata based on shareholding) rather than equal sharing. In litigation, calculate the contribution formula strictly according to Section 147 illustrations to resist inflated demands from co-sureties.

Section 146 All 266 Sections of Indian Contract Act Section 148