Question

The surety stands discharged by

• A. Death
• B. Revocation
• C. Variance in the terms of the contract without his consent
• D. None of the above

Hint:

Remember the three main categories for the discharge of a surety: 1. By Revocation (S. 130, 131 - applies to continuing guarantees). 2. By the Conduct of the Creditor (S. 133 - Variance, S. 134 - Release of debtor, S. 135 - Compounding with debtor, S. 139 - Impairing surety's remedy). 3. By Invalidation of the Contract (S. 142 - Guarantee obtained by misrepresentation, S. 143 - By concealment). Variance (S. 133) is a very strong and frequently tested ground.

Answer 1

The Correct Option is C

Step 1: Understanding the Concept:
A contract of guarantee involves three parties: the principal debtor, the creditor, and the surety (guarantor). The surety's liability is secondary and co-extensive with that of the principal debtor. The Indian Contract Act, 1872, provides several grounds on which a surety can be discharged from their liability.
Step 2: Detailed Explanation:
Let's analyze the options in the context of the Contract Act:
- (A) Death: The death of the surety operates as a revocation of a \textit{continuing guarantee} as to \textit{future transactions} (Section 131), but it does not automatically discharge the surety's estate from liabilities already incurred. So, it's not a complete discharge in all cases.
- (B) Revocation: A surety can revoke a \textit{continuing guarantee} as to \textit{future transactions} by giving notice to the creditor (Section 130). This does not discharge them from past transactions. For a specific guarantee, revocation is generally not possible once the creditor has acted upon it.
- (C) Variance in the terms of the contract without his consent: Section 133 of the Contract Act is very clear on this point. It states: "Any variance, made without the surety’s consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance." The surety guarantees a specific contract. If that contract is altered without their consent, the guarantee for the altered contract is discharged. This is a fundamental and complete ground for discharge.
Comparing the options, variance in the terms of the contract is the most definitive ground for the discharge of a surety's liability for the entire contract moving forward.