DISCHARGE OF SURETY

• A surety is said to be discharge when his

liability comes to an end.
Discharge of surety
 BY REVOCATION
• 1. BY NOTICE(SEC.130)
• a specific guarantee cannot be revoked by
the surety if the liability has already accrued. a
continuing guarantee may at any time be revoked by
the surety as to future transaction by the notice to the
creditor. But the surety remains liable for transaction
already entered into.
• For e.g. A guarantee to B, to the extent of rs.10000
that C shall pay all the bills that B shall drawn upon
him. B draws upon c. c accepts the bills. A gives notice
of revocation. C dishonors the bills at maturity. A is
liable upon his guarantee.
• 2.by death(sec.131)
• the death of the surety operates in the
absence of any contract to the contrary as a
revocation of a continuing guarantee so far as
future transactions . The deceased surety’s estate
will not be liable for any transaction entered into
between the creditor and the principal debtor
after the death of surety, even if the creditor has
no notice of death.
•
• 3.by novation(sec.62)
• novation means substitution of a new
contract of guarantee for an old one either
between the same parties or between one of
the old parties and a new party, the
consideration for the new contract being the
mutual discharge of the old contract. The
original contract of guarantee in such a case
comes to an end
 By the conduct of the creditor
• 1.By variance in terms of contract(sec133)
• A surety is liable for what he has undertaken in the
contract. When the terms of the contract between the
principal debtor and the creditor are varied without
the surety’s consent , the surety is discharged as to the
transactions subsequent to the variance.
• For e.g. c contracts to lend p rs.5000 on 1st march. S
guarantees repayment . C pays the amount to p on1st
January. S is discharged from his liability, as the terms
of the contract have been varied.
• 2.by release or discharge of principal debtor(sec.134)
• The surety is discharged by any contract between the
creditor and the principal debtor, by which the
principal debtor is released, or by any act or omission
of the creditor, the legal consequences of which is
discharged of the principal debtor. But the surety is
not discharged by operation of law.
• For e.g. A contract with B for a fixed price to build a
house for b within a stipulated time, b supplying the
necessary timber. C guarantees a’s performance of the
contract . B omits to supply the timber. C is discharged
from his suretyship.
• 3.by creditor compounding with the principal
debtor(sec135)
• a contract between the creditor and the principal debtor,
by which the creditor makes a composition with, or
promises to give time to, or not to sue the principal debtor
discharges the surety unless the surety assents to such
contract.
• For e.g. p purchased a motor car from c under hire-
purchase agreement on guarantee of s for the due
performance of the agreement . C for the valuable
consideration gives p further time for payment of one of
the instalments. Held the giving of time to p discharged s
from any further liability under the guarantee.
• 4.by creditor’s act or omission impairing surety’s eventual
remedy(sec139)
• if the creditor does any act which is inconsistent with
the rights of the surety, or omits to do any act which his
duty to the surety requires him to do, and the eventual
remedy of the surety himself against the principal debtor is
thereby impaired,the surety is discharged.
• For e.g. a puts m as apprentice to B and gives a guarantee
to B for M’s fidelity. B promises on his part that he will, at
least once a month see M make up the cash. B omits to see
this done, as promised, and M embezzles. A is not liable to
B on his guarantee.
• 5.by creditor losing security against the principal
debtor(sec141)
• if the creditor loses or, without the consent of the
surety, parts with the security he has against the
principal debtor at the time when the contract of
suretyship is entered into, the surety is discharged to
the extent of the value of the security.
• For e.g. c advances to b, his tenant rs2000 on the
guarantee of a. c has also further security for rs2000 by
a mortgage of b’s furniture. C cancels the mortgage. B
becomes insolvent and c sues a on his guarantee. A is
discharged to the extent of the value of the security.
 By invalidation of contract
• 1. by misrepresentation(sec.142)
• where a creditor misrepresents to the
surety regarding the material facts, the
guarantee is invalid and therefore the surety
is discharged
• 2.By concealment(sec.143)
• when a creditor obtains guarantee by concealing
or keeping silent over the materials facts, the surety is
discharged as the guarantee is invalid.
• For e.g. C engage p as a clerk to collect money for him.
P fails to account for some of his receipts and c, in
consequences, calls upon him to furnish security for his
duly accounting. S gives his guarantee for p’s duly
accounting. C does not acquaint s with p’s previous
contract . P afterwards makes default. The guarantee is
invalid
• 3.By failure of co-surety to join(sec.144)
• where a person gives a guarantee upon a
contract that a creditor shall not act upon it until
another person has joined in it as co-surety the
guarantee is not valid if that person does not join.
• For e.g. s2 signed a guarantee given to a bank
which on the face of it was intended to be joint
and several guarantee of s1,s2,s3 and s4. s4 did
not sign and afterwards died. The bank did not
agree with s1,s2 and s3 to dispense with s4’s
signatures. Held s2 was not liable.
• 4. by failure of consideration
• where in a contract of guarantee there
is a failure of consideration as between the
creditor and the principal debtor, the surety is
discharged.