Indian Contract Act Section 134 — Discharge of surety by release or discharge of principal debtor

CHAPTER VIII OF INDEMNITY AND GUARANTEE

Commercial / Corporate

Summary

The surety is released from their obligation when the creditor and the principal debtor make a contract that frees the principal debtor from the debt, or when the creditor does something or fails to do something that, as a legal result, discharges the principal debtor from the debt. In other words, if the main debtor is let off the hook through an agreement with the creditor, or through the creditor’s own action or inaction that legally ends the debtor’s liability, the surety no longer has to pay. For example, if a surety guarantees that A will perform a contract, and the creditor fails to supply the timber that was required, that omission discharges the principal debtor, and the surety is freed from the guarantee.

Official Text

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 consequence of which is the discharge of the principal debtor. Illustrations guarantees A’s performance of the contract. B omits to supply the timber. C is discharged from his suretyship.