The statement accurately encapsulates the dual nature of a surety's liability in a contract of guarantee. A contract of guarantee involves three parties: the principal debtor (who incurs the primary liability), the creditor (to whom the guarantee is given), and the surety (who guarantees the principal debtor's performance or payment).

Nature of Surety's Liability:

1. Secondary Liability: The surety's liability is 'secondary' because it arises only upon the default of the principal debtor. The primary obligation to perform or pay rests with the principal debtor. The creditor must first look to the principal debtor for performance. If the principal debtor fulfills their obligation, the surety's liability is discharged. This means the surety is a 'contingent' debtor, whose obligation crystallizes only when the principal debtor fails to perform.

2. Co-extensive Liability: Despite being secondary, the surety's liability is 'co-extensive' with that of the principal debtor. This means that the surety is liable for the exact same amount and to the same extent as the principal debtor. Whatever the principal debtor is liable for, the surety is also liable for, unless the contract of guarantee expressly provides otherwise. This implies that the surety can be called upon to pay the entire debt, including interest, costs, and other charges, just as the principal debtor would be.

Extent of Surety's Liability:

The co-extensive nature means:

• Same Quantum: The surety is liable for the full amount of the debt or obligation that the principal debtor owes, up to the limit specified in the guarantee. If the principal debtor owes ₹100,000, the surety is liable for ₹100,000 (unless the guarantee limits it to a lesser sum).
• Same Conditions: The surety's liability is subject to the same conditions and limitations as the principal debtor's liability. For instance, if the principal debtor's liability is conditional upon a certain event, the surety's liability is also conditional upon that event.
• No Prior Demand on Principal Debtor (in some jurisdictions): While the liability is secondary in nature, in many jurisdictions (like India, under Section 128 of the Indian Contract Act), the creditor is not required to exhaust all remedies against the principal debtor or even make a demand on the principal debtor before proceeding against the surety. The creditor can directly sue the surety upon the principal debtor's default, unless the contract of guarantee specifies otherwise.
• Discharge of Principal Debtor Discharges Surety: If the principal debtor's liability is discharged (e.g., by payment, performance, or novation), the surety's liability is also automatically discharged, as there is no longer a primary default to guarantee.

Illustrations:

• If 'A' guarantees a loan of ₹100,000 taken by 'B' from 'C'. If 'B' defaults, 'C' can demand ₹100,000 from 'A'. 'A' cannot argue that 'C' must first try to recover from 'B' or that 'A' is only liable for a portion. 'A's liability is co-extensive with 'B's.
• If 'B's liability is reduced due to a partial payment, 'A's liability is also reduced to the same extent.

Exceptions/Limitations to Co-extensiveness:

While the general rule is co-extensiveness, the contract of guarantee can expressly limit the surety's liability. For example:

• Limited Amount: The guarantee might specify that the surety's liability is limited to a certain maximum amount, even if the principal debtor's liability is higher.
• Specific Conditions: The guarantee might stipulate that the surety is only liable under certain conditions, or after the creditor has exhausted remedies against the principal debtor.

In essence, the secondary nature defines when the surety becomes liable (upon default), while the co-extensive nature defines how much the surety is liable for (the same as the principal debtor, subject to contractual limits). This framework provides robust security for creditors while ensuring the surety's obligation is tied directly to the principal debt.