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Discharge Of Surety




Welcome To Presentation On Discharge of Surety Shri Jairambhai Patel Institute of Business Management & Computer Applications (NICM-MBA) Submitted to: Prof. Prof. Bansi Patel Submitted By: Amit Gurav (MBA-B-014) DISCHARGE OF SURETY A surety is said to be discharge when his liability comes to an end BY REVOCATION BY THE CONDUCT OF THE CREDITORS BY INVALIDA IN VALIDATION TION OF CONTRACT By Revocation BY GIVING A NOTICE (SEC.130) DEATH OF NOVATION SURETY (SEC.62) (SEC.131) BY REVOCATION  1. BY NOTICE(SEC.130) A spec specif ific ic guar uarante antee e canno annott be revok voked by the the surety if the liability has already accrued. a continuing guarantee may at any time be revoked by the surety as to future transaction by the notice to the creditor. But the surety remains liable for transaction already entered into.  For For e.g. A guarantee guarantee to B, B, to the extent extent of Rs.10,0 Rs.10,000 00 that C shall pay all the bills that B shall drawn upon him. B draws upon C. C accepts the bills. A gives notice of  revocation. C dishonors the bills at maturity. A is liable upon his guarantee.  BY REVOCATION  2.BY DEATH(SEC.131)  The death of the surety operates in the absence of any contract to the contrary as a revocation of a continuing guarantee so far as future transactions . The deceased sure surety tyss est estate will will not be liab liable le for any any tran transa sact ctio ion n ente entere red d into into betw betwee een n the the cred credit itor or and and the prin princi cipa pall debtor after the death of surety, even if the creditor has no notice of death. BY REVOCATION  3.BY NOVATION(SEC.62)  Novation means subs ubstitution of a new contract of  guarantee for an old one either between the same parties or between one of the old parties and a new party, the consi onside derration tion for the the new new con contrac tractt bein being g the the mutu mutual al disc discha harg rge e of the the old old contr ontrac act. t. The The orig origin inal al cont contra ract ct of  guarantee in such a case comes to an end VARIANCE IN THE TERMS OF CONTRACT(SEC.133) DISCHARGE OF PRINCIPLE DEBTORS(SEC.134) BY THE CONDUCT OF THE CREDITORS COMPOUNDING BY CREDITORS WITH PRINCIPAL DEBTORS(SEC.135) CREDITORS ACT OR OMISSION IMPAIRING SURETY EVENTUAL REMEDY(SEC.139) LOSS OF SECURITY(SEC.141) By the conduct of the creditor creditor  1.BY VARIANCE IN TERMS OF CONTRACT(SEC133)   A surety is liable for what he has undertaken in the contract. When the terms of the contract between the principal debtor and the creditor are varied without the sure surety tyss cons consen entt , the the sure surety ty is disc discha harg rged ed as to the the transactions subsequent to the variance. For e.g. C contracts to lend P Rs.5000 on 1 st March. S guarantees repayment . C pays the amount to P on1st January. S is discharged from his liability, as the terms of  the contract have been varied. By the conduct of the creditor creditor  2.BY RELEASE OR DISCHARGE OF PRINCIPAL DEBTOR(SEC.134) The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequences of which is discharged of the principal debtor. But the surety is not discharged by operation of law. For e.g. A contract with B for a fixed price to build a house house for for B within within a stip stipul ulat ated ed time, time, B suppl supplyi ying ng the the necessary timber. C guarantees A4s performance of the contract . B omits to supply the timber. C is discharged from his suretyship.   By the conduct of the creditor creditor  3.BY CREDITOR COMPOUNDING WITH THE PRINCIPAL DEBTOR(SEC135) a contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue the prin princi cipa pall deb debtor tor disc discha harrge gess the the sur surety unle unless ss the the surety assents to such contract. contract. For e.g. P purchased a motor car from C under hirepurchase agreement on guarantee of S for the due performance of the agreement . C for the valuable considera consideration tion gives P further further time for payment of one of the ins instalments. Held the giving of time to P disc discha harrged S from from any any furt furthe herr liab liabil ilit ity y unde underr the the guarantee.   By the conduct of the creditor creditor  4.BY CREDITORS ACT OR OMISSION IMPAIRING SURETYS EVENTUAL REMEDY(SEC139)   if the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired,the surety is discharged. For e.g. A puts M as apprentice to B and gives a guarantee to B for Ms fidelity. B promises on his part that he will, at least once a month see M make up the cash. B omits to see this done, as promised, and M embezzles. A is not liable to B on his guarantee. By the conduct of the creditor creditor  5.BY CREDITOR LOSING SECURITY AGAINST THE PRINCIPAL DEBTOR(SEC141) if the creditor loses or, without the consent of the sur surety, ty, part partss with ith the the secu securi rity ty he has has agai agains nstt the the princ rincip ipal al deb debtor at the the time time when when the the contrac tractt of  suretyship is entered into, the surety is discharged to the extent of the value of the security.   For e.g. C advances to B, his tenant Rs.2,000 on the guarantee of A. C has also further security for Rs.2,000 by a mortgage of Bs furniture. C cancels the mortgage. B becomes insolvent and c sues a on his guarantee. A is discharged to the extent of the value of the security. security. BY MISREPRESENT MISREPR ESENTA ATION(SEC.142) TION(SEC .142) BY CONCEALMENT(SEC.143) BY INVALIDATION OF CONTRACT BY FAILURE FAILURE OF A CO-SURETY CO-SURET Y TO JOIN(SEC.144) BY FAILURE FAILURE OF CONSIDERATION By Invalidation of Contract  1. BY MISREPRESENT MISREPRESENTA ATION(SEC.142 TION(S EC.142))  Where a creditor misrepresents to the surety regarding the material facts, the guarantee is invalid and therefore the surety is discharged By Invalidation of Contract  2.BY CONCEALMENT(SEC.143)   When a creditor obtains guarantee by concealing or keeping silent over the materials facts, the surety is dischar discharged ged as the guara guarant ntee ee is inval invalid. id. For e.g. C engag engage e p as a cler clerk k to coll collec ectt mone money for him. P fails to account for some of his receipts and c, in consequences, calls upon him to furnish security for his duly accounting. S gives his guarantee for ps duly acc accounting. ing. C does not acq acquain aint s wit with ps previous contract . P afterwards makes default. The guarant guarantee ee is invalid invalid By Invalidation of Contract  3.BY FAILURE OF CO-SURETY TO JOIN(SEC.144)   Where a person gives a guarantee upon a contract that a creditor shall not act upon it until another person has  joined in it as co-surety the guarantee is not valid if that person does not join. For e.g. S2 signed a guarantee given to a bank which on the the face of it was intended nded to be join oint and and several guarantee of S1,S2,S3 and S4. S4 did not sign and afterwards died. The bank did not agree with s1,s2 and s3 to dispense with s4s signatures. Held s2 was not liable. By Invalidation of Contract  4. BY FAILURE OF CONSIDERATION  Where here in a contr ontrac actt of guar guaran anttee ther there e is a failu ailure re of  consideration as between the creditor and the principal debtor, debtor, the surety is discharged. THANK YOU