English Contract act 138 to 141

   Section 138

Release of one co surety does not discharge others

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Where there are co sureties a release by the creditors of one of them does not discharge the others 

Neither does it free the ,surety so released from his responsibility to the other sureties 

Section 139 -----Discharge of surety by creditor 's act or omission impairing surety 's eventual remedy ----

if the creditor does not any act which is inconsistent  with the right 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 discharged .

Land mark decision 

D Darwain and pears 

Principle debtor is a share holder in a company .he paid some amount for shares . respondent had taken surety for remaining amount . principal debtor did not pay and company had seized that shares .here surety had discharged due to this seizure .if company had not seized these shares then surety had not been discharged.

Illustrations 

A.B contracts to build a ship for C for a given sum ,to be paid by instalment as the work reaches certain stages .A becomes surety to C for B 's due performance of the contract .C without knowledge of A prepays to B the last two instalment .A is discharged by his prepayment.

B.C lends money to B on the security of joint and several promissory note made in C's favour by B and by A as surety for B together with a bill of sale of B 's furniture which gives power to C to sell the furniture and apply the proceeds in discharge of the note subsequently.C sells the furniture but owing to his misconduct and wilful negligence only a small price is realized .A is discharged from liability on the note .

C.A puts M as apprentice to B and gives a guarantee to B for M fidelity .B promises on his part that he we will at least once a month see M make up the cash .B omits to see this done promised and M embezzled .A is not liable to B on his guarantee 

Example 

1.if pledged property had been lost due to carelessness of bank then surety had been discharged from his liability .

Union Bank of India versus suresh bhai lal Mehta air Gujrat 1997 

2.when pledged property had been sold by principal debtor and bank was informed but bank did not take any action .in this condition surety had been discharged .

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Section 140 ---right of surety on payment of performance ----where a guaranted debt has become due or default of the principal debtor to perform a guaranteed duty has taken payment 

The surety upon payment or performance of all that he is liable for 

Is invested with all the right which the creditor has against the principal debtor 

Landmark decision 

Re lamplay iron ore company ltd.

A company was being dissolved .a director had taken guarantee for this rent .and paid the rent it had been decided that the right of land lord had been transferred into that director against company .now he could have taken that amount of rent 

Section 141 -----surety 's right to benefit of creditor 's securities ----

a surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into whether the surety knows of the existence of such security or not and if the creditor loses or without the consent of surety parts with such security 

The security ,the surety is discharged to the extent of the value of the security.

Land mark judgement 

Forbes versus jackson 

The principal debtor had mortgaged his leased property and insurance policy for 200 dollar . respondent had become surety for this debt .the principal debtor had taken more debt over these securities .the surety did not know about this .the principal debtor could not pay for this .the surety had paid the entire debt .and demanded securities .it had been decided that sureties would have got both securities.

Illustrations 

A.C advances to B his tenant 2000/ on guarantee of A .C has also a further security for 2000 rupees by a mortgage of B' s furniture .C cancels the mortgage.B becomes insolvent and C sues A on the amount of the value of furniture. 

B.C , creditor whose advance to B is secured by a decree ,receives also a guarantee for that advance from A .C afterwards takes B's goods in execution under the decree and then without the knowledge of A , withdraw the execution A is discharged.

C.A as surety for B makes a bond jointly with B to C to secure a loan from C to B . afterwards  C obtains from B a further security for the same debt . subsequently C gives up the further security.A is not discharged.

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