Discharge of Surety holder from liability
The basic idea behind the liability of the surety is that “ the surety is a person who provides security to the creditor when the principal debtor fails to perform his duties or goes insolvent”, it becomes the liability of the surety holder to be liable for the default of the principal debtor .in every situation the surety holder will the held liable except the grounds listed below:
In case of a specific guarantee, the contract cannot be revoked. A combining guarantee may be revoked at any time by the surety holder, by giving notice to the creditor in connection with the future transaction.
In case of the death of “the surety holder, it discharges the surety holder from his liability, in the absence of any contract regarding the same, the legal heirs of surety holders are liable”.Even in case of specific guarantee, the legal heirs stand as surety holder in case of his death.
“Any variation made in the terms of a contract between the principal Debtor and creditor without the consent of the surety holder discharges the surety holder from liability”.
Bonar vs Mc Donald
in this case, the defendant agreed to act as a surety holder for the conduct of the manager of the Bank. After that, the manager (the principal debtor )and Bank enter into another agreement (without informing the same to the defendant ), that his salary will be raised on being responsible for 1/4th of loss on an overdraft facility. Bank manager gave a loan to a person and he did not pay and became defaulter .the court held that surety holder is not liable as the variance made in the contract was not conveyed to the defendant.
In case of “any contract between the creditor and the principal debtor and in which if the principal debtor is released from the contract, then the surety holder also gets discharged from the liability”.” any act or omission of the creditor results in the release of the principal debtor shall also discharge surety holder from liability”.
A contract between the creditor and the principal debtor by which the creditor makes a composition or “promises to give time “or “promises not to sue “, the principal debtor then this discharges the surety holder from liability unless the surety holder consents to such contract.
Sec 137
“If there is a contract between the principal debtor and the creditor and if the creditor agrees to forbear to sue the principal debtor or agrees to enforce any other remedy against the debtor does not discharge the surety from liability”.
if the creditor does any act or omits to do any act which is inconsistent with the right of surety holder which affects or impairs the right of surety holder, then the surety holder is discharged from the liability. If the creditor fails to do his duty or performs an act which impairs surety's right (he gets discharged).
