{"id":4269,"date":"2020-04-02T14:14:54","date_gmt":"2020-04-02T14:14:54","guid":{"rendered":"https:\/\/commerceiets.com\/?p=4269"},"modified":"2020-04-02T14:14:54","modified_gmt":"2020-04-02T14:14:54","slug":"surety","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/surety\/","title":{"rendered":"SURETY"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/surety\/#RIGHTS_OF_SURETY\" title=\"RIGHTS OF SURETY\">RIGHTS OF SURETY<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/surety\/#RIGHTS_AGAINST_PRINCIPAL_DEBTOR\" title=\"RIGHTS AGAINST PRINCIPAL DEBTOR\">RIGHTS AGAINST PRINCIPAL DEBTOR<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/surety\/#RIGHTS_AGAINST_THE_CREDITOR\" title=\"RIGHTS AGAINST THE CREDITOR\">RIGHTS AGAINST THE CREDITOR<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/surety\/#RIGHTS_AGAINST_CO-SURETIES\" title=\"RIGHTS AGAINST CO-SURETIES\">RIGHTS AGAINST CO-SURETIES<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/surety\/#DISCHARGE_OF_SURETY_FROM_LIABILITY\" title=\"DISCHARGE OF SURETY FROM\nLIABILITY\">DISCHARGE OF SURETY FROM\nLIABILITY<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/surety\/#1_BY_GIVING_A_NOTICE_SECTION_130\" title=\"1) BY GIVING A NOTICE&nbsp;(SECTION 130)\">1) BY GIVING A NOTICE&nbsp;(SECTION 130)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/commerceiets.com\/surety\/#2_BY_DEATH_OF_SURETY_SECTION_131\" title=\"2) BY DEATH OF SURETY (SECTION\n131)\">2) BY DEATH OF SURETY (SECTION\n131)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/commerceiets.com\/surety\/#1_VARIANCE_IN_TERMS_OF_THE_CONTRACT_SECTION_133\" title=\"1) VARIANCE IN TERMS OF THE CONTRACT: (SECTION\n133)\">1) VARIANCE IN TERMS OF THE CONTRACT: (SECTION\n133)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/commerceiets.com\/surety\/#2_RELEASE_OR_DISCHARGE_OF_THE_PRINCIPAL_DEBTOR_SECTION_134\" title=\"2) RELEASE OR DISCHARGE OF THE PRINCIPAL DEBTOR: (SECTION\n134)\">2) RELEASE OR DISCHARGE OF THE PRINCIPAL DEBTOR: (SECTION\n134)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/commerceiets.com\/surety\/#3_ARRANGEMENT_BETWEEN_PRINCIPAL_DEBTOR_AND_CREDITOR_SECTION_135_136\" title=\"3) ARRANGEMENT BETWEEN PRINCIPAL DEBTOR AND CREDITOR:\n(SECTION 135 &amp; 136)\">3) ARRANGEMENT BETWEEN PRINCIPAL DEBTOR AND CREDITOR:\n(SECTION 135 &amp; 136)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/commerceiets.com\/surety\/#4_LOSS_OF_SECURITY_SECTION_141\" title=\"4) LOSS OF SECURITY: (SECTION\n141)\">4) LOSS OF SECURITY: (SECTION\n141)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/commerceiets.com\/surety\/#1_GUARANTEE_OBTAINED_BY_MISREPRESENTATION_SECTION_142\" title=\"1) GUARANTEE OBTAINED BY MISREPRESENTATION: (SECTION\n142)\">1) GUARANTEE OBTAINED BY MISREPRESENTATION: (SECTION\n142)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/commerceiets.com\/surety\/#2_GUARANTEE_OBTAINED_BY_CONCEALMENT_SECTION_143\" title=\"2) GUARANTEE OBTAINED BY CONCEALMENT: (SECTION\n143)\">2) GUARANTEE OBTAINED BY CONCEALMENT: (SECTION\n143)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/commerceiets.com\/surety\/#3_FAILURE_OF_CO-SURETY_TO_JOIN_A_SURETY_SECTION_144\" title=\"3) FAILURE OF CO-SURETY TO JOIN A SURETY: (SECTION\n144)\">3) FAILURE OF CO-SURETY TO JOIN A SURETY: (SECTION\n144)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/commerceiets.com\/surety\/#EXTENT_OF_A_SURETYS_LIABILITY\" title=\"EXTENT OF A SURETY\u2019S\nLIABILITY\">EXTENT OF A SURETY\u2019S\nLIABILITY<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1 class=\"has-text-align-center wp-block-heading\" id=\"rights-of-surety\"><span class=\"ez-toc-section\" id=\"RIGHTS_OF_SURETY\"><\/span><strong>RIGHTS OF SURETY<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\n\n\n\n<p>A surety is a person giving a guarantee in a contract of\nguarantee. A person who takes responsibility to pay a sum of money, perform any\nduty for another person in case that person fails to perform such work.<\/p>\n\n\n\n<p>After making a payment and discharging the liability of the principal debtor, the surety gets various rights. These rights can be studied under three heads:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"628\" height=\"245\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-5.png\" alt=\"\" class=\"wp-image-4271\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-5.png 628w, https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-5-300x117.png 300w\" sizes=\"(max-width: 628px) 100vw, 628px\" \/><\/figure>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"rights-against-principal-debtor\"><span class=\"ez-toc-section\" id=\"RIGHTS_AGAINST_PRINCIPAL_DEBTOR\"><\/span><strong>RIGHTS AGAINST PRINCIPAL DEBTOR<\/strong><strong><em><\/em><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>1)\nSECTION 140: THE RIGHT OF SURETY ON PAYMENT OF DEBT OR THE RIGHT OF SUBROGATION<\/strong><em>.<\/em><\/p>\n\n\n\n<p>The right\nof subrogation means that since the surety had given a guarantee to the\ncreditor and the creditor after getting the payment is out of the scene, the\nsurety will now deal with the debtor as if he is a creditor. Hence the surety\nhas the right to recover the amount which he has paid to the creditor which may\ninclude the principal amount, costs and the interest.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>2) SECTION 145:THE RIGHT OF<a href=\"https:\/\/commerceiets.com\/contract-of-indemnity\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" INDEMNITY (opens in a new tab)\"> INDEMNITY<\/a><\/strong><\/p>\n\n\n\n<p>In every <a href=\"https:\/\/commerceiets.com\/contract-of-guarantee-notes\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"contract of guarantee (opens in a new tab)\">contract of guarantee<\/a>, there is an implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee. This is because the surety has suffered a loss due to the non-fullfillment of promise by the principal debtor and therefore the surety has a right to be compensated by the debtor.<\/p>\n\n\n\n<p><strong>Example:<\/strong><br \/>\nLuthra and co has taken a loan from Khaitan and co where Amarchand acts as\nsecurity on behalf of Luthra. Khaitan demands payment from Amarchand and on his\nrefusal sues him for the amount, Amarchand defends the suit having reasonable\ngrounds for doing so, but he is compelled to pay the amount of the debt with\ncosts. He can recover from Luthra the amount paid by him for costs, as well as\nthe principal debt.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"rights-against-the-creditor\"><span class=\"ez-toc-section\" id=\"RIGHTS_AGAINST_THE_CREDITOR\"><\/span><strong>RIGHTS AGAINST THE CREDITOR<\/strong><em><\/em><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>1) SECTION 141: RIGHT TO SECURITIES GIVEN BY THE PRINCIPAL\nDEBTOR<\/strong><\/p>\n\n\n\n<p>On\nthe default of payment by the principal debtor, when the surety pays off the\ndebt of the principal debtor he becomes entitled to claim all the securities\nwhich were given by the principal debtor to the creditor. The Surety has the\nright to all securities whether received before or after the creation of the\nguarantee and it is also immaterial whether the surety has knowledge of those\nsecurities or not.<\/p>\n\n\n\n<p><strong>Example:<\/strong><br \/>\nOn the guarantee of Priya, Anita lent rs 100000 to Sita. This debt is also\nsecured by security for the debt which is the lease of Sita\u2019s house. Sita\ndefaults in paying the debt and Priya has to pay the debt. On paying off Sita\u2019s\nliabilities Priya is entitled to receive the lease deed in her favor.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>2) RIGHT TO SET OFF<\/strong><\/p>\n\n\n\n<p>When\nthe creditor sues the surety for the payment of principal debtor\u2019s liabilities,\nthe surety can claim set off, or counterclaim if any, which the principal\ndebtor had against the creditor.<\/p>\n\n\n\n<h2 class=\"has-text-align-center wp-block-heading\" id=\"rights-against-co-sureties\"><span class=\"ez-toc-section\" id=\"RIGHTS_AGAINST_CO-SURETIES\"><\/span><strong>RIGHTS AGAINST CO-SURETIES<\/strong><em><\/em><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>1) SECTION 138:RELEASE OF ONE CO-SURETY DOES NOT DISCHARGE\nOTHERS<\/strong><\/p>\n\n\n\n<p>When\nthe repayment of debt of the principal debtor is guaranteed by more than one\nperson they are called Co-sureties and they are liable to contribute as agreed\ntowards the payment of guaranteed debt. The release by the creditor of one of\nthe co-sureties does not discharge the others, nor does it free the released\nsurety from his responsibility to the other sureties. Thus when the payment of\na debt or performance of duty is guaranteed by co-sureties and the principal\ndebtor has defaulted in fulfilling his obligation and thus the creditor compels\nonly one or more of the co-sureties to perform the whole contract, the\nco-surety sureties performing the contract are entitled to claim contribution\nfrom the remaining co-sureties.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>2) SECTION 146:CO-SURETIES TO CONTRIBUTE EQUALLY&nbsp;<\/strong><\/p>\n\n\n\n<p>According\nto Section 146, in the absence of any contract to the contrary, the co-sureties\nare liable to contribute equally. This principle will apply even when the\nliability of co-sureties is joint or several, and whether under the same or\ndifferent contracts, and whether with or without the knowledge of each other.<\/p>\n\n\n\n<p><strong>Example:<\/strong><br \/>\nA, B, C, and D are co-sureties for a debt of Rs. 2,0000 lent by Z to R. R\ndefaults in repaying the loan. A, B, C, and D are liable to contribute Rs. 5000\neach.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>3) SECTION 147: LIABILITY OF CO-SURETIES BOUND IN DIFFERENT\nSUMS<\/strong><\/p>\n\n\n\n<p>When\nthe co-sureties have agreed to guarantee different sums, they have to\ncontribute equally subject to the maximum of the amount guaranteed by each one.<\/p>\n\n\n\n<p><strong>Example<\/strong><br \/>\nA, B and C, sureties for D, enter into three separate bonds, each in a\ndifferent penalty, A for Rs. 10,000, B for Rs. 20,000 and C for Rs. 40,000. D\nmakes default to the extent of Rs. 30,000. A B and C are liable to pay Rs.\n10,000 each. Suppose this default was to the extent of Rs. 40,000. Then A would\nbe liable for Rs. 10,000 and B and C Rs. 15,000 each.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"discharge-of-surety-from-liability\"><span class=\"ez-toc-section\" id=\"DISCHARGE_OF_SURETY_FROM_LIABILITY\"><\/span><strong>DISCHARGE OF SURETY FROM\nLIABILITY<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Under any of the following circumstances a surety is discharged from his liability:<br \/> i) By the revocation of the contract of guarantee,<br \/> ii) By the conduct of the creditor, or<br \/> iii) By the invalidation of the contract of guarantee<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>BY\nREVOCATION OF CONTRACT OF GUARANTEE<\/strong><strong><\/strong><\/p>\n\n\n\n<p>So\nfar as a guarantee given for an existing debt is concerned, it cannot be\nrevoked, as once an offer is accepted it becomes final. However, a continuing\nguarantee can be revoked for future transactions. In that case, the surety\nshall be liable for those transactions which have already taken place.<\/p>\n\n\n\n<p>A contract of guarantee can be revoked in the following two ways:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"591\" height=\"271\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-6.png\" alt=\"\" class=\"wp-image-4272\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-6.png 591w, https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-6-300x138.png 300w\" sizes=\"(max-width: 591px) 100vw, 591px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"1-by-giving-a-notice-section-130\"><span class=\"ez-toc-section\" id=\"1_BY_GIVING_A_NOTICE_SECTION_130\"><\/span><strong>1) BY GIVING A NOTICE&nbsp;<\/strong>(SECTION 130)<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Continuing\nguarantees can be revoked by giving notice to the Creditor but this applies\nonly to future transactions. Just by giving a notice the surety cannot waive\noff his responsibility and still remains liable for all the transactions that\nhave been placed before the notice was given by him. If the contract of\nguarantee includes a clause that a notice of a certain period of time is\nrequired before the contract can be revoked, then the surety must comply with\nthe same as said in&nbsp;<em>Offord v Davies (1862).<\/em><\/p>\n\n\n\n<p><strong>Illustration<\/strong><\/p>\n\n\n\n<p>A\nguarantees to B to the extent of Rs. 10,000, that C shall pay for all the goods\nbought by him during the next three months. B sells goods worth Rs. 6,000 to C.\nA gives notice of revocation, C is liable for Rs. 6,000. If any goods are sold\nto C after the notice of revocation, A shall not be, liable for that.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"2-by-death-of-surety-section-131\"><span class=\"ez-toc-section\" id=\"2_BY_DEATH_OF_SURETY_SECTION_131\"><\/span><strong>2) BY DEATH OF SURETY <\/strong><em>(SECTION\n131)<\/em><em><\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Unless\nthere is a contract to the contrary, the death of surety operates as a\nrevocation of the continuing guarantee in respect to the transactions taking\nplace after the death of surety due to the absence of a contract. However, his\nlegal representatives will continue to be liable for transactions entered into\nbefore his death. The estate of deceased surety is, however, liable for those\ntransactions which had already taken place during the lifetime of the deceased.\nSurety\u2019s estate will not be liable for the transactions taking after the death\nof surety\u2019even if the creditor had no knowledge of surety\u2019s death.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>BY CONDUCT OF THE CREDITOR<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"583\" height=\"433\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-7.png\" alt=\"\" class=\"wp-image-4273\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-7.png 583w, https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-7-300x223.png 300w\" sizes=\"(max-width: 583px) 100vw, 583px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"1-variance-in-terms-of-the-contract-section-133\"><span class=\"ez-toc-section\" id=\"1_VARIANCE_IN_TERMS_OF_THE_CONTRACT_SECTION_133\"><\/span><strong>1) VARIANCE IN TERMS OF THE CONTRACT: <\/strong><em>(SECTION\n133)<\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When\na contract of guarantee has been materially altered through an agreement\nbetween the creditor and principal debtor, the surety is discharged from his\nliability. This is because a surety is liable only for what he has undertaken\nin the guarantee and any alteration made without the surety\u2019s consent will\ndischarge the surety as to transactions subsequent to the variation.<\/p>\n\n\n\n<p><strong>Illustration<\/strong><\/p>\n\n\n\n<p>A\nbecomes surety to C for B\u2019s conduct as a manager in C\u2019s bank. Afterward, B and\nC contract, without A\u2019 s consent, that B\u2019 s salary shall be raised, and that he\nshall become liable for one-fourth of the losses on overdrafts. B allows a\ncustomer to over-draw, and the bank loses a sum of money. A is discharged from\nhis suretyship by the variance made without his consent and is not liable to\nmake good this loss.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"2-release-or-discharge-of-the-principal-debtor-section-134\"><span class=\"ez-toc-section\" id=\"2_RELEASE_OR_DISCHARGE_OF_THE_PRINCIPAL_DEBTOR_SECTION_134\"><\/span><strong>2) RELEASE OR DISCHARGE OF THE PRINCIPAL DEBTOR: <\/strong><em>(SECTION\n134)<\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A\nsurety is discharged if the creditor makes a contract with the principal debtor\nby which the principal debtor is released, or by any act or omission of the\ncreditor, which results in the discharge of the principal debtor.<\/p>\n\n\n\n<p><strong>Illustration<\/strong><br \/>\nA supplies goods to B on the guarantee of C. Afterwards B becomes unable to pay\nand contracts with A to assign some property to A in consideration of his\nreleasing him from his demands on the goods supplied. Here, B is released from\nhis debt, and C is also discharged<br \/>\nfrom his suretyship. But, where the principal debtor is discharged of his debt\nby operation of law,<br \/>\nsay, on insolvency, this will not operate as a discharge of the surety.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"3-arrangement-between-principal-debtor-and-creditor-section-135-136\"><span class=\"ez-toc-section\" id=\"3_ARRANGEMENT_BETWEEN_PRINCIPAL_DEBTOR_AND_CREDITOR_SECTION_135_136\"><\/span><strong>3) ARRANGEMENT BETWEEN PRINCIPAL DEBTOR AND CREDITOR:\n(SECTION 135 &amp; 136)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According\nto&nbsp;<em>section 135<\/em>&nbsp;when the creditor, without\nthe consent of the surety, makes an arrangement with the principal debtor for\ncomposition, or promise to give him time to, or not to sue him, the surety will\nbe discharged.<br \/>\nHowever, when the contract to allow more time to the principal debtor is made\nbetween the creditor and a third party, and not with the principal debtor, the<br \/>\nsurety is not discharged<em>.<\/em><\/p>\n\n\n\n<p><strong>Illustration<\/strong><br \/>\nC, the holder of an overdue bill of exchange drawn by A as surety for B, and\naccepted by B, contracts with M to give time to B, A is not discharged.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"4-loss-of-security-section-141\"><span class=\"ez-toc-section\" id=\"4_LOSS_OF_SECURITY_SECTION_141\"><\/span><strong>4) LOSS OF SECURITY: <\/strong><em>(SECTION\n141)<\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If\nthe creditor parts with or loses any security given to him at the time of the\nguarantee, without the consent of the surety, the surety is discharged from liability\nto the extent of the value of the security.<\/p>\n\n\n\n<p><strong>Illustration<\/strong><br \/>\nA, as surety for B, makes a bond jointly with 3 to C to secure a loan from C to\nB. Later on, C obtains from B further security for the same debt. Subsequently,\nC gives up further security. A is not discharged.<\/p>\n\n\n\n<p class=\"has-green-background-color has-background\"><strong>BY INVALIDATION OF THE\nCONTRACT<\/strong><\/p>\n\n\n\n<p>A contract of guarantee, like any other contract, may be avoided if it becomes void or voidable at the option of the surety. A surety may be discharged from liability in the following cases:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"647\" height=\"342\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-8.png\" alt=\"\" class=\"wp-image-4274\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-8.png 647w, https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/04\/image-8-300x159.png 300w\" sizes=\"(max-width: 647px) 100vw, 647px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"1-guarantee-obtained-by-misrepresentation-section-142\"><span class=\"ez-toc-section\" id=\"1_GUARANTEE_OBTAINED_BY_MISREPRESENTATION_SECTION_142\"><\/span><strong>1) GUARANTEE OBTAINED BY MISREPRESENTATION: <\/strong><em>(SECTION\n142)<\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When\na misrepresentation is made by the creditor or with his knowledge or consent,\nrelating to a material fact in the contract of guarantee, the contract is\ninvalid<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"2-guarantee-obtained-by-concealment-section-143\"><span class=\"ez-toc-section\" id=\"2_GUARANTEE_OBTAINED_BY_CONCEALMENT_SECTION_143\"><\/span><strong>2) GUARANTEE OBTAINED BY CONCEALMENT: <\/strong><em>(SECTION\n143)<\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When\na guarantee is obtained by the creditor by means of keeping silence regarding\nsome material part of circumstances relating to the contracts, the contract is\ninvalid<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"3-failure-of-co-surety-to-join-a-surety-section-144\"><span class=\"ez-toc-section\" id=\"3_FAILURE_OF_CO-SURETY_TO_JOIN_A_SURETY_SECTION_144\"><\/span><strong>3) FAILURE OF CO-SURETY TO JOIN A SURETY: <\/strong><em>(SECTION\n144)<\/em><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>When\na contract of guarantee provides that a creditor shall not act on it until\nanother person has joined in it as a co-surety, the guarantee is not valid if that\nother person does not join.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"extent-of-a-surety-s-liability\"><span class=\"ez-toc-section\" id=\"EXTENT_OF_A_SURETYS_LIABILITY\"><\/span><strong>EXTENT OF A SURETY\u2019S\nLIABILITY<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In\nthe absence of a contract to the contrary, the liability of a surety is\nco-extensive with that of the liability of the principal debtor. It means that\nthe surety is liable to the same extent to which the principal debtor is\nliable.<\/p>\n\n\n\n<p><strong>Illustration<\/strong><br \/> A guarantees to B the payment of a bill of exchange by C, the acceptor. On the due date, the bill is dishonored by C. A is liable, not only for the amount of the bill but also for any interest and charges which may have become due on it.<\/p>\n\n\n\n<p><strong>JOIN THE CHANNEL ON TELEGRAM<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/t.me\/commerceiets\" target=\"_blank\">https:\/\/t.me\/commerceiets<\/a><\/p>\n\n\n\n<p><strong>CONNECT ON LINKEDIN<\/strong><\/p>\n\n\n\n<p><a href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noopener\">https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>RIGHTS OF SURETY A surety is a person giving a guarantee in a contract of guarantee. A person who takes responsibility to pay a sum of money, perform any duty for another person in case that person fails to perform such work. After making a payment and discharging the liability of the principal debtor, the&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/surety\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;SURETY&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":4275,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/4269"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=4269"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/4269\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/4275"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=4269"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=4269"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=4269"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}