DISCHARGE OF SURETY

LIABILITY
NAME:THEJASWINI.S
REG NO: 22DBALB044
COURSE: SPECIAL
CONTRACT(5BAL304)
Surety plays a very important role in contract of guarantee

The term discharge means “to release” or “to free”

Modes of discharge of surety liability

1. By Revocation (S.130)

--Discharge by sending notice

--Applicable only for continuing guarantee
--Surety liability will stop for future transactions
2. Death of the surety (S.131)
--Applicable for continuing guarantee
--The liability of the deceased can be imposed on his legal heirs only to the extent of
inherited property
3. By Variance (S.133)
--Change in terms of contract between principal debtor and creditor without the consent of
the surety
--Surety discharges from his liability as to the transactions after the change
4.Release or Discharge of Principal Debtor (S.134)
--Surety is discharged by three ways ;
1.Principal Debtor performs his duty
2.When “Act of the creditor” discharges the principal debtor
3.When “Omission of the creditor” discharges the principal debtor

5.Composition, Extention of Time, Promise not to Sue (S.135)

--Composition (if the principal debtor and creditor involves in the variation of the original
contract without the consent of the suety)
--Extention of time (if the creditor extends time for the principal debtor)
--Promise not to sue(if the creditor promises not to sue the principal debtor )

S.136

--When an agreement is made by the creditor with a third person to give time to principal debtor
then surety is not discharged.
6.By Impairing Surety’s Remedy (S.139)
--Means to weaken the rights of the surety
--When creditors act or omission affects the rights of the surety, he is discharged
CASE LAWS

--Bonar V. William Mc.Donald and ors

FACTS
The defendants entered into a contract of guarantee for the conduct of the manager of a bank. The bank raised
his salary and he was made liable to one-fourth of the loss, without the consent of the surety. The manager
allowed a customer to overdraw his amount and this lead to loss.
HELD
It was held that the variation in the terms of the contract was made without taking the surety into
consideration and the variation is obviously material. Hence, the surety is discharged from his liability.

--Sita Ram Gupta V. Punjab National Bank

FACTS
The appellant revoked the guarantee given by him before the amount was advanced to the principal debtor.
However, there was a clause in the contract of guarantee entered into, which provided that the guarantee is of
continuing nature and will not be cancelled or revoked.
HELD
The court held that the appellant was himself responsible for waiving off his own rights and hence, cannot
revoke the contract.
THANK YOU