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The Indian Contract Act, 1872: page 37

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     138.Release of one co-surety does not discharge others.—Where there are co-sureties, a release by
the creditor of one of them does not discharge the others; neither does it free the surety so released from
his responsibility to the other sureties1.
    139. Discharge of surety by creditor’s act or omission impairing surety’s eventual remedy.—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, and the eventual remedy of the surety himself against the
principal debtor is thereby impaired, the surety is discharged.
                                                          Illustrations
     (a) B contracts to build a ship for C for a given sum, to be paid by instalments as the work reaches certain stages. A becomes
surety to C for B’s due performance of the contract. C, without the knowledge of A, prepays to B the last two instalments. A is
discharged by this prepayment.
      (b) C lends money to B on the security of a 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’s fidelity. B promises on his part that he will, at least once
a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee.
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    140.Rights of surety on payment or performance.—Where a guaranteed debt has become due, or
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default of the principal debtor to perform a guaranteed duty has taken place, the surety upon payment or
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performance of all that he is liable for, is invested with all the rights which the creditor had against the
principal debtor.
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    141.Surety’s right to benefit of creditor’s securities.—A surety is entitled to the benefit of every
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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 the surety, parts with such security, the surety is discharged to the extent of the
value of the security.
                                                          Illustrations
      (a)C, advances to B, his tenant, 2,000 rupees on the guarantee of A. C has also a further security for the 2,000 rupees by a
mortgage of B’s furniture. C cancels the mortgage. B becomes insolvent and C sues A on his guarantee. A is discharged from
liability to the amount of the value of the furniture.
     (b)C, a 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, withdraws 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.

   142. Guarantee obtained by misrepresentation invalid.—Any guarantee which has been obtained
by means of misrepresentation made by the creditor, or with his knowledge and assent, concerning a
material part of the transaction, is invalid.
    143. Guarantee obtained by concealment invalid.—Any guarantee which the creditor has obtained
by means of keeping silence as to material circumstances, is invalid.
                                                          Illustrations
     (a)A engages B as clerk to collect money for him. B fails to account for some of his receipts, and A in consequence calls
upon him to furnish security for his duly accounting. C gives his guarantee for B’s duly accounting. A does not acquaint C with
B’s previous conduct. B afterwards makes default. The guarantee is invalid.




1. See s. 44, supra.

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