Question

The debt due may be principal and interest. In such a case, if debtor makes part payment, then ________.

• A. payment should be appropriated towards interest
• B. payment should be appropriated towards principal
• C. payment should be appropriated towards principal and alter principal is fully paid off, to interest
• D. payment should be first appropriated towards interest and alter interest is fully paid off, to principal

Answer 1

The correct option is D payment should be first appropriated towards interest and alter interest is fully paid off, to principal

Section 128 of the Indian Contract Act, 1872 deals with 'Surety's liability'. It states, The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract. —The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract." Illustration A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable, not only for the amount of the bill, but also for any interest and charges which may have become due on it. A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable, not only for the amount of the bill, but also for any interest and charges which may have become due on it."