Discharge of surety by variance in terms of contract
Any variance, made without the surety’s consent, in the
terms of the contract between the principal (debtor) and the creditor,
discharges the surety as to transaction subsequent to the variance. Section
133.
Material alteration in contract
If there is a substantial alteration in the contract even if
there is no actual prejudice to the surety which can be shown to exist, the
surety will be discharged as neither the court nor the jury will go into the
question whether there has been any actual prejudice or not. The surety is the
sole judge as to whether he will continue to remain liable on the new contract
or not.
Alteration in contract materially affecting surety
In determining the liability of a surety the terms of the
bond must in every case be carefully studied; and if there is any change in the
position of the principal debtor as regards his creditor, it must materially
affect the position of the surety, before the latter can be absolved from
liability.
Where a guarantor entrusts a letter of guarantee to the
principal debtor and the principal debtor makes an alteration without the
assent of the guarantor, then the guarantor is liable because it is due to the
act of the guarantor that the letter of guarantee remains with the principal
debtor. What the principal debtor did will estop the guarantor from pleading
any want of authority.
Alteration beneficial to surety
Unsubstantial alterations in an instrument which are to the
benefit of the surety do not discharge the surety from his liability. Where,
however, the alteration is to the disadvantage of the surety, or its
unsubstantial character is not self-evident, the surety can claim to the
discharged. The court will not then inquire whether it had in fact harmed the
surety.
No variation of contract
It is only where there is variation of contract that the
surety is discharged. If the original contract on which he is liable is not
varied, any other act done by the parties would not affect the contract of
suertyship. A breach of contract is not a variation and hence a breach of
contract between the principal and the creditor does not in any way discharge
the surety although the creditor has not enforced any remedy against the
principal.
Payment in satisfaction of creditor’s claim
Where a person offers a cheque to the decree-holder in
satisfaction of his claim, he does not become a surety and if the stops payment
of the cheque, section 34 does not apply becaue such person was not a surety.
Act or omission of the creditor
Discharge of the debtor without the consent of the surety
destroys the liability of the surety though he had signed as a co-executant,
where the creditor knew that he was surety.
Omission to sue principal within limitation
Section 134, contract Act , applies where there is either a
release or a discharge of the principal debtor. The sectionintends that the act
or omission of the creditor should be something in the nature of a breach of
contract on his part. The failure of the creditor to bring a suit within the
period of limitation against the principal debtor is not an act or omission of
the nature contemplated by that section.
Extension of time
Where a creditor extends time for the payment of a debt,
without the surety’s consent, the surety is discharged. Where a creditor grants
time to the debtor and allows payment by installments without the surety’s
consent, the surety is discharged from his liability.
Extension of time with consent of surety
Where there is a stipulation in a surety bond that the
surety was not to be discharged by any dealings between the creditor and the
principal debtor, the surety is not in any way relieved by the time given to
the principal debtor without his knowledge of concurrence.
Extension on part payment of debt
A surety’s liability does not come to an end if the creditor
gives time to the principal debtor in consideration of part payment of the debt
by the latter.
Extension as to payment of part of debt
When the payment of only a portion of a guaranteed debt is
allowed to be postponed, the discharge of the surety extends only to such
portion and not to the rest of the liabilities with regard to which he is not
prejudiced.
Extension of time by court
Where it is the court and not the deree-holder which grants
time to judgment-debtor to pay by adjourning the case from time to time in
spite of decree-holder’s opposition, the surety is not discharged. If the
surety acquiesces in the orders of the Court, he cannot say that time was
granted without his consent.
Striking off balance by principal debtor
Striking of balance by principal debtor unsigned by the
surety does not discharge the surety, inasmuch as while it extended time and
privileges to the creditor it did not confer any benefit on the principal debtor.
Acknowledgment of debt by principal debtor
An acknowledgement by the principal debtor does not save
limitation against the surety unless it is shown that the latter allowed
himself to be represented by the person who made the payment.
Assent by surety
The principle that the rights of surety are not to be
interfered with without his consent, ought to the applied even to a case not
governed by the contract, Act.
0 comments:
Post a Comment