THE LEGAL WATCH
Trusted Contract Advisory
TLW - Contract Awareness Initiative
TLW - Legal Awareness Initiative
1. Gajanan Moreshwar Parelkar v. Moreashwar Madan Mantri, AIR 1942 Bom 302
The plaintiff leases a land to BMC for a term of 999 years. the defendant asked the plaintiff to transfer the benefit of agreement of lease to him which was in with the BMC. The plaintiff did so. The possession of land was with the defendant and the owner of the land was the plaintiff. The defendant started to construct a building on the land. For construction the materials were supplied by Keshavadas Mohandas, the amount exceeded Rs.5000 which the defendant failed to pay. The plaintiff mortgage the land to Keshavadas Mohandas on the request of defendant now Rs. 5000 and sum of 10% interest were payable. Again, with relation to the construction of said building the defendant had to pay rs.5000 to Keshavadas Mohandas. The defendant again requested the plaintiff to put charge on the property in favour of Keshavadas Mohandas. The rate of interest was as same rate as previous. To get the mortgage deed released before certain date defendant agreed to pay the principal amount, interest. Now the land had to transferred to the plaintiff. The defendant to procure a release of plaintiff’s liability the mortgage and deed from keshavadas Mohandas as asked by the plaintiff. Hence the plaintiff sued the defendant for indemnity
1. Whether the plaint discloses any cause of action?
2. Whether the suit was premature as the petitioner did not incur any loss?
It was held that the indemnity holder has right other than mentioned in section 125. If the liability incurred by the indemnity-holder is absolute liability than he can be indemnified by the indemnifier. Thus, the plaintiff was entitled to be indemnified.
Principal of law: a person promises to save the other from loss caused to him by conduct of promisor himself.
Relevant Sections: section 124; section 125;
2. Adamson v. Jarvis,
The petitioner (Adamson) was an auctioneer, the defendant represented himself as the real owner of the cattle and goods and gave certain cattle for auction. The defendant had no right to sell the cattle which the petitioner was not aware. The real owner of the cattle sued the defendant and was successful and adamson had to pay the damages to the real owner. In return the petitioner filed a case against the defendant for indemnity. He sued to get indemnified for the loss he suffered for paying the damages to the real owner.
1. Whether all the damages that indemnity holder had to pay in a suit to which the promise if indemnifier applies?
2. Whether petitioner was entitled to pay damages as he was not aware of the fact that Jarvis is not the real owner?
It was held that, As the Jarvis did not enclose the true facts about the ownership, it was held that the defendant is entitled to pay the loss incurred by the petitioner for payment of damages to the real owner.
Principal of law: indemnity-holder has right to recover all cost which he may compelled to pay in any suit.
Relevant Sections: section 125 of Indian contract act.
3. Secretary of state vs. the bank of India’ 
A lady was the endorse and holder of a Government promissory note of Rs. 5000. A broker having possession of the note on the lady’s behalf, forged her endorsement to it in his favour and endorsed it for a value to the respondent (bank). The respondent in good faith, applied to the public debt office under Indian Securities Act, 1920. The lady becoming aware of the fraud sued the Secretary of state for conversion and recovered the appropriate damages. The secretary in turn bought action against the bank on the basis of implied indemnity.
1. Whether the secretary of state get indemnified by bank?
2. Whether indemnity can be implied?
It was held that the appellant should recover from the respondent proper amount of claim, it also says the express indemnity clause is not necessary for face of implied right to indemnity which is beforehand existing under the Indian Laws.
Principal of law:
If an act is done by a person on request of another and the act is not tortuous to the knowledge of the other person doing the act, the person doing the act has right to indemnity from the person who requested such act when the act in question turns out to be injurious to the right of third person.
4. Osman Jamal & Sons v. Gopal [(1728) ILR 56 Cal 262]
The plaintiff’s company entered into an agreement with the defendant’s firm, as the plaintiff’s company would act as commission agent for the defendant firm for purchase and sale of hessian and gunnies and charge commission on all such purchase. And the defendant firm would indemnify the plaintiff company against all losses in respect of transaction entered on their behalf.
In course of action the plaintiffs company purchased hessian cloth from Maliram Ramjidas, the defendant firm failed to take delivery of certain instalments which lead to plaintiff’s company suffer loss. The plaintiff’s company was directed to wound up by an order of court and appointed the official liquidator who filed a suit for recovery of the said amount claimed by Maliram Ramjidas from the defendant firm under indemnity.
The defendant argued that the plaintiff did not pay any amount to Maliram in respect to the liability and they were not entitled to maintain suit under indemnity.
1. When does the indemnifier become liable to pay and when the indemnity holder entitled to recover his indemnity?
The court observed that the official liquidator recovers the amount even if the company did not actually pay the vendor in respect of the defendant’s liability.
In English law it says “you must be damnified before you claim to be indemnified” where as in India there is no provision which states when a contract can be enforced. It is not necessarily given repayment after payment. Indemnity requires that the party to be indemnified shall never be called upon to payment.
5. Mohit Kumar Saha vs New India Assurance Co AIR 1997, Calcutta HC 197
In this case the petitioner took out an insurance policy for his truck from the respondents ’s company. The policy dated 25th September 1987 to 24 September 1988. The truck with load of fish-feed was stolen by the driver of said truck, the truck was stolen after assaulting the father of the petitioner who was in the same truck. The father of the petitioner sustained stabbing injuries. The report was filed. Petitioner also reported about the theft to the Assistant Branch Manager of the company. A claim was also lodged with the company for loss of the truck.
1. The rate at which interest is payable by the respondent company?
2. What amount the petition is liable under insurance policy?
It was held that the company should pay the full value of the vehicle lost to left. Lesser value settlement is considered as arbitrary and violates the article 14 of constitution.
6. P.J. Rajappan v Associated industries 1983
Here in this case the guarantor did not signed the contract of guarantee, tried avoid the situation and said he did not stand as surety for the performance of the contract. But it was shown in the evidence that the guarantor in deed and he also promised to sign the contract.
Whether the defendant is held liable as guarantor?
The Kerala High Court observed that a contract of guarantee is tripartite agreement, which includes principal debtor, surety and the creditor. Mere failure on the part of guarantor in not signing the agreement is not sufficient to prove that he did not involved in the transaction leading to the conclusion that he guaranteed the performance of the contract by the principal debtor.
Principal of law: Contract of guarantee is a tripartite agreement.
Relevant Sections: Section 126, 127.
7. State Bank of India v Premco Saw Mill (1983),
The debtor-defendant got a notice from the state bank of India’ and the bank also threatened to take legal action against her. In meantime er husband became the surety and undertook to pay the liability and he also executed a promissory note in favour of the bank and bank withhold to take legal action her the defendant.
Issue: Whether there is enough consideration for the surety
It was held by the court that patience and acceptance on the banks side set up a good consideration for the surety.
Principal in Law: Any promise made for the benefit of the principal debtor is sufficient consideration to the suety for giving guarantee.
Relevant Sections: Section 127.
8. London general Ominibus Co Ltd VS. Holloway 1912 2 KB 72
In this case Lee was appointed by the bus company for receiving money on their behalf. Holloway a relative of the lee relative gave a fidelity bond as the company asked lee to obtain one from third party. Holloway gave the bond unaware of the fact that lee had previously had misappropriated money and nor the company nor Lee disclosed the fact to him. The company sued Holloway to recover further sum misappropriated by lee.
Issue: Whether Holloway is liable to pay the company?
The court held that the guarantee could not be enforced as nondisclosure of facts
Principal in Law:
Any guarantee which the creditor has obtained by keeping silence as to the material circumstances is invalid.
Relevant Sections: Section 143.
9. Bank of Bihar v. Dr. Damodar Prasad and anr 1969 AIR 297
Here, the plaintiff Bank lent money to Damodar against guarantee given by Paras nath Sinha. Both the principal debtor and the surety did not repay the amount and interest to the plaintiff even after plaintiff’s demand. The surety after the demand had agreed to pay ₹12,000 and the interest within two days. the bond provided that the plaintiff will have the liberty to enforce and recover upon the guarantee notwithstanding any other guarantee security which the bank might hold in respect of the amount secured. For calming the total amount Bank filed a suit.
Whether the creditor is bound to exhaust his remedy against the principal debtor before suing the surety for the recoverable amount and can the court pronounce upon such a condition in its decree?
It held that the surety before the payment had no right to dictate terms to creditor and pursue his remedies first against principal debtor.
The contentions raise by the appellant were accepted by the court and held that the very object of the guarantee is defeated if the creditor is asked to postpone his remedies against the surety.
Relevant Sections: Section 128.
10. Craythorne v. Swineburne
On request of Sir John Swineburne, Newcastle Bank gave money to Henry Swineburene for paying to another bank. The money was lent on security of two bonds. One being joint bond and several bond of HS as principal and Craythorne as security other being bond by John Swineburne which said that the bond will be void as soon Henry Swineburene AND Craythrone as surety or either of them pay the money back. Henry Swineburene died insolvent and the plaintiff Craythrone has to pay the whole sum. He filed a bill to make John Swineburne (defendant) pay his part.
whether the defendant’s surety was co-surety for C or the surety for both?
It was held that the defendant is the surety for both hence he is liable to pay only if other two fail to pay.
Principal in Law: When surety has paid the guaranteed debt he can recover the money from the principal debtor.
Relevant Sections: section 140
11. Lala Shanti Swarup v. Munshi Singh 1967 SCR (2) 312
Here the plaintiff-respondent mortgage a land to Bansidhar and Khub Chand for ₹12000.The real owner sold that land to Shanti Saran (appellant) at ₹16,000. Shanti saran agreed to the amount due i.e. paid ₹13500 to the Bansidhar and Khub Chand. Shanti saran failed to pay and hence Bansidhar and Khub Chand filed a suit.
1. Whether there is a contract of indemnity?
It was held that as Shanti Saran failed to discharge the encumbrance had bought loss to the vendor then plaintiff-Respondent can bring suit on the contract of indemnity
Principal in Law: a person promises to save the other from loss caused to him by conduct of promisor himself.
Relevant Sections: section 124
12. State of Madhya Pradesh v. Kaluram 1967 SCR (1) 266
Brief Facts: Jagatram was awarded the sale at an auction of sale of felled trees, on payment of a security and subsequent payment of instalments. Nathuram and Kaluram (defendants) sureties for Jagatram .A contract was executed in the favour of governor of M.P which had term along with terms that the related to the area which the contractor was allowed to take away the trees the contractor had to furnish a coupe boundary certificate. Jagatram removed the entire quantity of the trees and also paid the first instalments but failed pay the rest. The state of MP claimed for recovery. Claiming that He is not liable to pay arrears of forest dues recoverable from Jagatram, Kaluram failed an action.
Issue: Whether Kaluram is liable to pay the arrears due?
It was held that since Jagatram removed all trees the surety stood discharged. Kaluram Stood discharged from all liability.
Principal of law: “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 consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security.”
Relevant section: Section 141
13. Radha Kanta Pal vs United Bank Of India Ltd. AIR 1955 Cal 217
In consideration of bank employing Nishikant Pal, Rajanikant Pal deceased executed a security bound in favour of Bank. It was found that Nishikant Pal was guilty of mismanaging money. The bank tried to enforce the bond and recover the money. After finding out the mismanagement the bank continued to employ Nishikant Pa. Rajinikant’s heir(plaintiff) filed a suit claiming the security back.
Whether Heir of Rajinijant is entitled to reliefs as per s.139?
It was observed by the high court that section 139 cannot be maintained. There must be inconsistent with the right of the surety or an omission to do an act to impairment of the remedy against the principal debtor. Evidence did not show that the principal debtor had impaired.
Principal in Law:
The surety is discharged 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.
Relevant Sections: section 139.
14. Amrit Lal Goverdhan Lalan v. State Bank of Travancore and Ors. 1968 SCR (3) 724
Respondent 3 to were partners of Respondent 2 firm, entered into an agreement with a bank to open credit account to the extent of ₹100000 to be secured by goods to be pledged with the bank. The agreement said that the borrowers shall be responsible for the quantity and quality of goods pledged. The surety of borrowers was the appellant with respect to the account and the bank was allowed to recover notwithstanding any other security the bank holds. When the stock pledged was initially valued at ₹ 99,991 but after verification the value was ₹35690 was found. It was alleged that respondent 2 to respondent 6 have taken the goods. Time was granted to make up the deficit but they failed. ₹40933.58 was found due to the bank after adjusting the money. Suit was filed by the bank against then and appellant.
1. Whether they were variance in term of contract?
2. Whether the conduct of bank of giving time to R1-R6 to make up the deficit in the goods discharge’s Appellants liability?
It was held that w.r.t 1st The entries in the books of account were mere internal instructions not legally binding on the respondents, and in view of the formal record in the original agreement and letter of guarantee, there could not have been a variation in the terms without a proper written agreement. Therefore, there was no variance in the terms of the contract and the provisions of s. 133 of the Act were not attracted.
w.r.t 2nd the act of bank giving time to the respondents does not amount as same as to the meaning of the section 135. Section 135 means that the extension of time period at which the principal debtor was by the original contract obliged to pay the creditor, by a new contract between them.
Relevant Sections: section 133,135,139 and 141
15. State Bank of Saurashtra vs. Chitranjan Rangnath Raja and Anr. 1980 AIR 1528, 1980 SCR (3) 915
Brief Facts: On pledging of 5000 tins of groundnut oil the bank (appellant) allowed a cash credit of rs. 75000 to the principal debtor and on personal guarantee of the respondent. After the death of the principal debtor when the bank lost the pledged tins, bank sued the legal representative pf the principal debtor and the surety for repaying the debt. Surety contested discharge of his liability.
1. Whether the pledge of the goods and the guarantee contract amounted to single transaction.
2. Whether s.141 is applicable here, and to what extent is the surety discharged
The court observed the evidence and held the surety will be discharged to the whole extend as the price of oil is enough to satisfy banks claim.
To attract s.141 it must show that the creditor took more than one security from principal debtor at the time when the contract pf guarantee was entered into irrespective of the fact whether the surety had knowledge about the other security, the surety would be discharged to the extend of the value of security.
Relevant Sections: section 141
16. Charan Singh vs Security Finance (P) Ltd. Citation(s): AIR 1988 Delhi 130
Money decree was obtained by the creditor from the two principal debtors and the surety, making them liable severally as well as jointly. Creditor made an agreement where he agreed to accept lesser amount than the judgement-debt with one of the principal debtors and after the death of other principal debtor the creditor did not take any action against the representatives of the deceased principal debtor. The creditor pursued cause action against the surety. The surety claimed his discharge from the liability.
Whether surety be discharge from his liability after the money decree is passed?
The court held that the surety was not discharged as after under the money decree is passed surety becomes judgement debtor. Surety’s rights and liabilities are governed under decree provisions and not under the Indian contract act.
Principal in Law: After a decree has been passed the character of the principal debtor and the character of the surety change into those of co-judgement debtors. The provisions of S. 133 to 139 of the Contract Act apply only where no decree has been passed by the court…The subsequent dealing with the principal debtor does not operate to discharge the surety from a liability under which he is [liable], no longer as a surety, but under the decree… The above provisions of the Contract Act which govern the rights and liabilities of the creditor, the principal debtor and surety, cease to operate after the rights and liabilities are determined and declared by a decree.”
Relevant Sections: section 135
17. Hindustan Steel Workers Construction (HS)  Ltd. v. G.S. Atwal & Co. (Engineers) Pvt. Ltd. (GS)  1995 SCC (6) 76
Hindustan steel workers construction and G.S was to construct 11 schools. Two bank guarantees were given to Hindustan steel workers on behalf of G.S. there was a dispute regarding the performance which led to arbitration. while the dispute was pending for arbitration, GS to restrain Hindustan steel workers from enchasing the bank Guarantees GS claimed injunction.
Issue: Whether Hindustan steel can invoke the bank guarantee in the present situation?
It was held that Hindustan steel cannot restrained in invoking the conditional guarantee.
Principal in Law: Unless there is fraud and irretrievable damages an injunction against enforcement of bank guarantee of credit, the court cannot interfere.
18. Ansal Engg. Proj. Ltd. v. Tehri Hydro Development Corp. Ltd. & Anr. 1997 88 CompCas 149 SC
The petitioner- appellant had taken construction work for the defendant-respondent and as per the contract a bank guarantee for performance and to get mobilization against construction contract. The appellant failed to complete the construction in given time. Respondent pursue to en-cash the bank guarantee. Appellant resorted for arbitration and requested the high court that bank guarantee should not be invoked.
Whether appellant had made any fraud and irretrievable damages by proof to invoke court jurisdiction by induction to restrain the respondent from encasing the bank guarantee?
It was held that it is not ground to issue injunction restraining the beneficiary to enforce the bank guarantee.
Principal of law: the bank cannot be restrained from encasing the bank guarantee even if there is dispute in performance of the contract unless fraud present.
19. ONGC v. SBI Overseas Branch, Bombay AIR 2000 SC 2548
At certain contract price ONGC gave a large gas pipeline contract to an Italian consortium. The work had to be completed within the given time M/s. Saipem SPA/Snamprogetti of Italy failed the it had to pay certain percentage of contract price and had to furnish a bank guarantee not later than 4 months prior to the schedule completion date. If failed the ONGC can enchase the bank guarantee. And if it delays the M/s. Saipem SPA/Snamprogetti had to get extention on validity of bank guarantee. India would be the jurisdiction if any dispute arises. The project got delay and there was dispute regarding the extension of bank guarantee. ONGC tried to invoke the bank guarantee but the state bank of India refused to pay on these grounds.
1. If the bank had issued bank gurantee in favour of ONGC against the counter guarantee of an Italian bank and if M/s. Saipem SPA/Snamprogetti had obtained an order of injunction from the Italian bank from making any payments to the state bank of India under the counter guarantee.
2. The payment of bank guarantee in rupee can be made only on receipt of reimbursement from Italian bank in an approved manner
3. ONGC should wait until the issue is resolved if the matter being subjunctive.
1. Whether a confirmed bank guarantee can be interfered by the court?
2. Whether encasement of unconditional bank guarantee depends on adjudication of disputes?
3. What effect the counter guarantee will have in this case?
Court held that bank guarantee can be invoked by ONGC without Interference as there is no presence of fraud and irretrievable injustice. Bank cannot decline payment under a bank guarantee on reason that the counter guarantee was restrained by a foreign court.
20. Daewoo Motors India Ltd V. Union of India AIR 2003 SC 178
The appellant had acquired various import licences for which bank guarantees were issued from various banks. One bank had agreed for unconditional guarantee, to pay the president of India and demand without protest the amount due. He had to pay the president of India when were certain obligation could not be complied with the import licence, he invoked the bank guarantee and demanded encashment from the bank. The bank refused to do so.
Issue: whether the appellant can en cash the guarantee?
It was held that the bank cannot refuse the encashment.
Principal in Law: Surety gives a contract of guarantee for repayment of debt by principal debtor. If the principal debtor fails to repay the surety undertakes to repay the debt.
Relevant Sections: section 126
21. National Provincial Bank of England V. Glanusk:
S gave guarantee on P’s account with bank. P paid off an over draft which he had with another bank while drew on this account. Bank was of suspicious that P was defrauding S BUT did not communicate its Suspicion to S. S sued for discharge of his surety.
Issue: Whether S is discharged of his surety?
The court held that the guarantee is not discharged since bank was not under the obligation to disclose to the surety.
Principal of Law: if the guarantee obtained by the creditor is by means of keeping silence as to the material circumstances is invalid. Since the suspicion of bank was not a material fact the surety was not discharge.
Relevant Sections: SECTION 143.
22. Maharaja of Benares v. Har Narain Singh
In this suit where appeal arose the plaintiff claimed against defendants who were sureties or representatives of sureties for due payment of rent by jadunandan Singh, a sum representing arrears of rent with interest the plaintiff was unable to recover in spite of having a decree. The defendants demanded that under the agreement they were not liable for interest on arrears of rent due by their principal debtor.
Issue: Whether the plaintiff is entailed to recover interest on arrears from the sureties?
It was held that there was no mention of interest on the rent, the liability of surety was confined to the arrears
Principal of Law: the principal debtor himself was not liable for the interest on the rent hence the surety to the debt in not liable for the interest on the debt.
Relevant Sections: SECTION 128.
23. Union of India v. Manku Narayana
The appellant bank had lent a sum ₹5100 to the principal debtor against mortgage of property and independent guarantee of the respondent. A suit was filed to make the respondent personally liable. The respondent resisted execution against him on ground that the bank must exhaust the remedies against the principal debtor and the mortgaged property first.
Issue: Whether the respondent is personally liable?
The supreme court held that since a portion of the borrowed amount is covered by mortgage, the bank should proceed against mortgage first and then against the guarantor.
Principal of Law: The liability of the sureties co-extensive with that of principal debtor. The creditor to can proceed against the surety after proceeding against principal debtor unless it is provided in the contract.
24. Florence Mabel R.J. v. State of Kerala
The respondent for bee-keeping took a loan from a co-operative society to which the petitioner had guaranteed. Due to viral infection the bee died and the business failed which led to failure of respondent side to pay the loan. The petitioner argued that there was frustration of contract and is not liable to pay.
Issue: Whether the petitioner is discharged of his surety because of frustration of contract?
The court held that the surety isn’t discharge and the petitioner is liable to pay off the installment, as he agreed if the principal debtor fails, he would be liable jointly and severally.
Principal of Law: liability of surety is co-extensive with principal debtor. The surety is liable when the principal contract is rendered impossible.
Relevant Sections: Section 128.
25. Khatun Bibi v. Abdulla,1880 3 ALL9
Brief Facts: in this case a payment of rent was guaranteed by the surety. Without the consent of surety, the rent was increased. The principal debtor failed to pay rent. Action was bought against the surety.
Issue: Whether the surety is discharged?
The court held that the surety gets discharged.
Principal of Law: variation in the terms of contract without the consent of surety, revokes the subsequent transaction or revokes the continuing guarantee.
Relevant Sections: Section 133.
26. Lloyd’s v Harper (1880) 16 Ch D 290:
A father guaranteed for his is son’s action as underwriting member of Lloyd’s business.at that Lloyds was a voluntary association which was governed by the law which provided that an individual cannot be excluded from membership unless they declared bankruptcy and insolvency. Later the company incorporated and they become governed by act of parliament. A notice was sent to Lloyds after the death of the father. Two years later the become bankrupt and ceased to be a member of Lloyds.
1. Whether the grantee provided on behalf of the son could still be enforced, after the death of the father?
2. Whether the father and his estate would be accountable for the son’s bankruptcy and subsequent loss of membership?
The court held that after death of father the guarantee moved to the father’s estate.
Principal of law: a continuing can be revoked at any time by the surety for future transaction but the death of surety moves it on to his estate.
Relevant Section: Section 130
27. Offord v. Davies (1862) 12 CBNS:
In this case, the defendant secure money to advance to a third party on discount for the space of twelve calendar month. The failed to pay the money that were required by the agreement. The plaintiff lost money as the defendant failed to pay. The defendant claimed that before the first payment they had withdrawn their guarantee for the money and were not required to advance the money. The plaintiff argued that the defendant could not withdraw the offer that they had not accepted the defendants withdrawal.
1. Whether the withdrawal was accepted by the plaintiff?
2. Whether the defendant has successfully withdrawn their offer?
It was held that Revocation becomes effective for the future transaction. Where the surety remains liable for transaction which are already entered into.
Relevant section: 130
28. Bonar v. Mac Donald
Mac Donald was one of the sureties who were guarantor of one David Baird who had obtained employment on surety of Mac Donald at bank. there was certain variance made in the contract without consent of surety. Baird allowed a customer to overdraw and the bank incurred loss. Action was bought against the sureties.
Issue: whether the sureties were discharged from their suretyship?
It was held that due to the variance made in the contract without the consent the suretyship of sureties was discharged.
Principal of Law: The surety ship discharges, if any variance is made in the terms of contract without the consent of the surety.
Relevant Section: s. 133
29. MS Anirudhan Vs. The Thomco’s Bank Ltd
A bank gave a blank form of guarantee to Mr. Sankaran, he filled up by the appellant stating the maximum amount which he guaranteed to was ₹25000. The duly signed letter from the appellant was bought to the bank. Bank refused to accept the guarantee up to the limit. The bank wanted to limit it to ₹20000. Mr. Sankaran made alteration in the limit to ₹20000 and gave it to bank. When a suit was instituted, the appellant pleaded without his consent the the document was altered.
Issue: Whether the surety is said to be discharged of his liability due to the alteration made?
It was held by the court that if the variance made in agreement is for the benefit of the surety or does not prejudice him anyway or is minor or insignificant in nature then the surety is not discharged.
Principal of law: Any alteration made in in terms of guarantee which is for the benefit of surety it shall be considered to discharge the surety from his obligation under the contract.
Relevant section: Section 133
30. Bolton v. Salmon
Brief facts: In this case the defendant was a surety for a loan and had kept his property as security. The principal debtor further bowered from the creditor and executed a new deed consolidating all the loans.
Issue: whether the surety’s liability is discharged?
It was held by the court that the property kept as security as well as the surety’s liability gets discharged.
Principal of Law: any variance made in the contract without the consent of the surety. The surety’s liability is said to be discharged.