Contract act 131 to 133

 

Section 131 . Revocation of continuing guarantee by surety's death 

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 regards future transaction .but transaction before his death will be recovered from his legal heir 

Explanation ----according this section whenever there is no clear provision in contract if surety dies , guarantee is ended automatically.there is no liability of surety and his heir after his death .

Section 132.liability of two persons ,primarily liable ,not affected by agreement between them that one shall be surety on other 's default -----where two persons contract with a third person to undertake a certain liability 

And also contract with each other that one of them shall be liable only on the default of the other 

The third person not being a party to such of such two persons to third person under the  first contract is not affected by the existence of the second Contract 

Although such third person may have been of its existence.

Illustrations 

A and B make a joint and several promissory note to C.A makes it in fact as surety for B and C knows this at the time when the note is made .the fact that A to the knowledge of C made the note as surety for B is no answer to a suit by C against A upon the note .

Section 133.discharge of surety by variance in terms of contract 

Any variance ,made without the surety 's consent ,in the terms of contract between the principal debtor and the creditor , discharge the surety as to transaction subsequent to the variance

Landmark  decisions

Bonar versus macdonald 

Respondent had given guarantee for a bank manager . Bank had increased his salary .the bank manager will liable one fourth amount for the loss over discounting by him .manager had given overdraft which could not be got .surety had been sued  for this recovery

Decision -----surety is not liable because the condition of contract had been changed without his permission so he had been released from his responsibility.

Explanation ---if changes are beneficial for surety he cannot be discharged from his liability.if changes are against surety he can be discharged from his liability.

Illustrations 

A.a becomes surety to C for B 's conduct as a manager in C's bank .afterwards B and C contract without A 's consent 

That B 's salary shall be raised and that he shall become liable for one fourth of the lesses on overdrafts .B allows a customer to over draw and the bank loses a sum of money .

A is discharged from his suretyship by the variance made without consent and is not liable to make good this loss 

B.A guarantee C against  the misconduct of B in an office to which B is appointed by C and of which B is appointed by C and of which the duties are defined by an act of the legislature by a subsequent act the nature of the offer is materiallly altered 

Afterweeks B misconducts himself A is discharged by the change from future liability under his guarantee through the misconduct of B is in requests of a duty not affected by the later act 

C.C agrees to appoint B as his clerk to sell goods at a yearly salary upon A 's becoming surety to C for B 's duly accounting for moneys received by him as such clerk 

Afterwards without A 's knowledge or consent .C and B agree that B should be paid by a commission on the goods sold by him and not by a fixed salary .A is not liable for  subsequent misconduct of B 

D.A gives to C a continuing guarantee to the extent of 3000/ rupees for any oil supplied by C to B on credit .afterwards  B becomes embarassed and without the knowledge of A ,B and C contract that C shall continue to supply B with oil for ready money and that the payment shall be applied to the then existing debts between B and C .A is not liable on his guarantee for any goods supplied after the new arrangement

E.c contracts to lend B 5000/ rupees on 1 st march .A guarantee repayment C pays the 5000/ rupees to B on the 1st  January A is discharged from his liability as the contract has been varied inasmuch  as C might sue B for the money before the first march .

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