Discharge of surety when creditor compounds with, gives time to, or agrees not to sue, principal debtor.— A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract.
Discharge of surety when creditor makes a deal with the main debtor
If a creditor makes an agreement with the main debtor — for example, agrees to accept less money, gives more time to pay, or promises not to sue the debtor — then the surety (the person who promised to pay if the debtor fails) is usually released from their responsibility.
Important: The surety is only still responsible if they agree to this new deal.
Example 1
R borrows ₹50,000 from S. P is the surety for R. Later, S agrees with R to accept only ₹30,000 as full payment. P does not agree to this. In this case, P (the surety) is no longer responsible to pay the remaining ₹20,000, because S has changed the terms with R without P’s consent.
Example 2
A borrows ₹1,00,000 from S. R is the surety. S agrees to give A 6 more months to pay the loan. R does not agree to this. R is no longer responsible if A fails to pay, because S changed the terms without R’s consent.
Example 3
V borrows ₹2,00,000 from P. A is the surety. P promises V that she will not sue him for the loan. A does not agree to this promise. A is no longer liable if V fails to pay, because P’s promise changed the creditor’s rights.