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Contract of guarantee

In this question, this variance was beneficial for surety rite since there is reduction in the interest component. Then why is it mention no matter whether the variance is beneficial it still discharges the surety ?

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Swathi Krishna

Swathi Krishna

CA Inter

8K+

08-Sep-20

113

Answers (4)

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 act says any variance (so whether or not favourable) Say, the interest rate is reduced because the borrower is not able to pay higher rate of interest. This could indicate that borrower has lost financial ability and the surety is not aware. So wheter beneficial or not, it discharges.


Suraj Lakhotia

Suraj Lakhotia

Admin

08-Sep-20

Generally contract of surety depends upon trust of surety on principal debtor. If the terms of the contract are changed or altered without consent/notice of surety such trust will be effected. So, law makers intended to discharge the liability of surety from the date of alteration but surety is liable for any loss incurred due to principal debtor upto date of alteration.


VIJAYA SARADHI MAGANTI

VIJAYA SARADHI MAGANTI

CA Inter

850

08-Sep-20

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