Explain in detail the discharge of a surety.

Question: Explain in detail the discharge of a surety. [BJS 2000]

Find the answer to the mains question of the Law of Contract only on Legal Bites. [Explain in detail the discharge of a surety.]

Answer

In Indian Contract Act, 1872, a surety is a person who guarantees the performance of an obligation by another party, known as the principal debtor. The Surety provides a guarantee to the creditor that if the principal debtor fails to fulfill their contractual obligations, the surety will be liable for the debt or obligation.

Discharge of a surety refers to the release or termination of the surety's liability from the obligation. There are several ways in which a surety can be discharged under the Indian Contract Act.

Discharge by performance or release: If the principal debtor fulfills the contractual obligation or the creditor voluntarily releases the principal debtor from the liability, the surety is also discharged. In such cases, the surety's liability ends as the obligation has been completed or terminated.

Discharge by agreement: The surety can be discharged if there is an agreement between the creditor, principal debtor, and the surety. This can occur when all parties agree to a new arrangement that releases the surety from their liability. However, it is essential to note that the creditor's consent is crucial in such cases.

Discharge by revocation: If the surety provides a notice of revocation to the creditor before the contract is concluded, the surety's liability is discharged. This revocation should be communicated to the creditor before the contract between the creditor and the principal debtor is finalized.

Discharge by variation in terms of the contract: If there is a material alteration or variation in the terms of the contract without the surety's consent, the surety is discharged from their liability. The variation should be significant enough to affect the surety's rights and obligations. Minor changes may not discharge the surety.

Discharge by creditor's act or omission: The surety can be discharged if the creditor does any act or omits to do anything, which may impair the surety's rights. For example, if the creditor fails to take legal action against the principal debtor or does any act that releases the principal debtor from their obligation, the surety's liability may be discharged.

Discharge by the death of the surety: If the surety dies, their liability under the contract comes to an end, unless otherwise specified in the contract. However, the surety's estate will be liable for any obligations or debts incurred before their death.

Discharge by the creditor's conduct: If the creditor does any act that is inconsistent with the surety's rights, it may discharge the surety from their liability. For instance, if the creditor enters into a new agreement with the principal debtor that changes the surety's rights without their consent, the surety may be discharged.

The Discharge of a surety does not automatically discharge the principal debtor. The creditor can still pursue the principal debtor for the fulfilment of the contractual obligations, even if the surety is discharged.