CONTRACT OF GUARANTEE

Contract of Guarantee is a specific performance contract. It is called specific

performance because it is an equitable relief. This is not the usual legal remedy where
compensation for damages is adequate. Damages and specific performance are both
remedies available upon breach of obligations by a party to the contract; the former is
a ‘substitutional remedy’, and the latter a ‘specific remedy’.

The contract of Guarantee is Specific performance because the remedy is not the
damages awarded by the court. The party has to fulfil its obligation under the contract
i.e. perform a certain action he promised to do, instead of just paying money for his
failure to fulfil obligations under the contract. It is the guarantor who commits to pay
in case of default by the person for whom he has guaranteed. The nature of relief is
specific since the guarantor has to perform the specific obligation, which he had
undertaken under the agreement i.e. pay the assured. A guarantee may be either oral or
written.

Contract of Guarantee

Section 126 defines the Contract of Guarantee– A guarantee contract involves three
parties. It relates to the performance of the contract on behalf of the third person
whereby fulfilling his obligation under the contract by the guarantor

The person who gives the guarantee is called the ‘’Surety’’; the person in
respect of whose default the guarantee is given is called the ‘’Principal
Debtor’’, and the person to whom the guarantee is given is called the
“Creditor”.

Purpose of Contract of Guarantee

It enables a person to get a loan or goods on credit or employment. Some person comes
forward and assures the lender, the supplier, or the employer that he may be trusted
and in case of any untoward incident, “I undertake to be responsible”.

In the old case of Birkmyr v Darnell, the court said: Where a collateral guarantee
arises when two persons come to shop, one of them to buy, the other to give credit,
thereby promising the seller stating if he doesn’t pay I will’’. This is a collateral
guarantee.

In English law, a guarantee is defined as ‘’a promise to pay for the debt, default or
failure of another’’. “Guarantees are a backup when the principal fails the guarantee act
as second pockets’’.
Essential Features of Contract of Guarantee

1. Principal Debt-

It is essential to have recoverable debt. A guarantee assures the payment of a debt,

which needs to be possible to recover. The fundamental aspect of a guarantee is that a
person is responsible for a significant debt, and the guarantor agrees to take
responsibility if the former defaults. Without a principal debt, a legal guarantee cannot
exist. The ruling of the House of Lords in the Scottish case of Swan v Bank of
Scotland in 1836 stated that the payment of a customer's overdraft by a banker was
guaranteed by the defendant. However, the overdrafts violated a statute that
penalised those involved and hence made them void. When the customer defaulted, the
surety was held responsible for the loss. Yet, the court found him not guilty as the
commitment to make good the debt or balance only made sense if there was one in the
first place.

Guarantee for void debt, when enforceable

A guarantee can be enforceable even if the debt it is associated with is void. This
means that directors of a company can still be held accountable for guaranteeing a loan
that was void due to ultra vires. The reasoning behind this is that the voidness of a
contract to guarantee the debt of a company acting ultra vires is different in its
consequence from the voidness brought about by the express and emphatic language of
a statute.

Guarantee of Minor's Debt

When a minor's debt is guaranteed, it raises a dilemma. If the obligation is declared

void, should the surety still be held liable? In India, individuals who knowingly
guarantee a minor's debt are held liable as principal debtors, following older English
precedents, as established in the case of Kashiba Bin Narsapa Nikade vs. Narshiv
Shripat. According to the Bombay High Court, a guarantor to a bond granted by a
juvenile for money borrowed for unnecessary litigation can still be sued, regardless of
whether the contract is defective or voidable. There is no reason why a person cannot
contract to ensure a third party's performance of an imperfect obligation. If the debt
is void, the "surety" contract becomes a principal contract rather than collateral.
 2. Consideration-

Like every other contract, a contract of guarantee should also be supported by

some consideration. A guarantee without consideration is void. But there need be no
direct consideration between the surety and the creditor.

Section 127 clearly says: Anything done, or any promise made, for the benefit of
the principal debtor, may be a sufficient consideration to the surety for giving the
guarantee.

In the case of Madan Lai Sobe v Rajasthan State Industrial Development &
Investment Corp Ltd, (2006) 135 DLT 554, where a credit has already been
given, and the payment has become due, the creditor refrains from suing the
principal debtor, that would be a sufficient consideration for giving a guarantee.

3. Misrepresentation and concealment-

Misrepresentation and concealment are two aspects of the duty of disclosure in a

contract of guarantee. A contract of guarantee is a tripartite agreement that involves
a surety, a principal debtor, and a creditor. The surety promises to perform the
obligation of the principal debtor in case of his default.

Misrepresentation means making a false or misleading statement of fact that induces

the other party to enter into the contract. Concealment means withholding or hiding a
material fact that the other party ought to know. Both misrepresentation and
concealment can affect the validity and enforceability of a contract of guarantee.

According to Section 142 of the Indian Contract Act, 1872, any guarantee obtained by
means of misrepresentation made by the creditor, or with his knowledge and assent,
concerning a material part of the transaction, is invalid. For example, if the creditor
misrepresents the creditworthiness or character of the principal debtor to the surety,
the guarantee is void.

Similarly, according to Section 143 of the Indian Contract Act, of 1872, any guarantee
which the creditor has obtained by means of keeping silence as to a material
circumstance, is invalid. For example, if the creditor conceals from the surety the fact
that the principal debtor has already defaulted on a previous loan, the guarantee is
void.

However, a contract of guarantee is not a contract of utmost good faith (uberrimae

fidei), which means that the parties are not obliged to disclose every fact or
circumstance that may affect the contract. The duty of disclosure only extends to
material facts, which are those that would influence the judgment of a prudent person
in deciding whether to enter into the contract or not.
Some of the relevant case laws on misrepresentation and concealment in a contract of
guarantee are:

Birkmyr v Darnell (1704): This is an old English case that illustrates the concept of
misrepresentation in a contract of guarantee. In this case, two people went to a shop,
one to buy and the other to give credit. The surety said to the seller, "If he does not
pay you, I will". The seller, knowing that the buyer had a bad credit position, did not
disclose it to the surety. The buyer failed to pay and the seller sued the surety. The
court held that the guarantee was invalid because the seller had misrepresented the
buyer's credit position to the surety.

Lima Leitao and Co. v Union of India (1968): This is an Indian case that illustrates
the concept of concealment in a contract of guarantee. In this case, the plaintiff
company supplied goods to the defendant government on credit, based on a guarantee
given by a bank. The bank had agreed to guarantee the payment of the goods up to a
certain limit. However, the plaintiff company did not inform the bank that the
defendant government had already exceeded the credit limit and continued to supply
more goods. The defendant's government failed to pay and the plaintiff company sued
the bank. The court held that the guarantee was invalid because the plaintiff company
had concealed the fact that the credit limit had been exceeded by the bank.

4. All the essentials of a valid contract.

(i) The principal debtor need not be competent to contract. In case the
principal debtor is not competent to contract, the surety would be regarded
as the principal debtor and would be personally liable to pay.
(ii) Surety need not be benefited. According to Section 127, "Anything
done, or any promise made, for the benefit of the principal debtor, may be a
sufficient consideration to the surety for giving the guarantee." (iii) A
guarantee need not be in writing. According to Section 126, a
guarantee may be either oral or written.

NATURE & EXTENT OF SURETY'S LIABILITY

As laid down in Section 128 of the Indian Contract Act, of 1872, the liability of the
surety is coextensive. It has the same extent as that of the principal debtor. It
emphasizes the maximum degree as well as the scope of the surety’s liability.

Coextensive

‘Coextensive’ is an attribute to the word extent and refers to the amount of the
quantum of the principal debt. This particular section only explains the ambit of the
extent of the surety’s obligation when no limit has been stipulated against the validity
of the principal debtor’s obligation.

The Section further explains how the surety may, however, in the agreement impose
certain limits to the extent of his liability entering into a special contract. They can
make a declaration and impose a certain restriction on their liability. Unless it is
expressly mentioned in the terms of the contract, neither can the surety be held liable
by the creditor nor can he sue him, till the principal debtor makes a default. Therefore,
the surety’s liability is secondary or peripheral.

It is encouraging to take note of the fact that even before the Indian Contract Act, of
1872 was enacted the Indian courts perceived the principle of co-extensiveness. In the
case of Lachman Joharimal v. Bapu Khandu and Another (1869), the Bombay High
Court explained how it is not binding on the creditor to extinguish his remedies before
suing the principal debtor. On obtaining a decree against the surety, it may be upheld in
a similar way as a pronouncement or a decree for any obligation of the party or any debt
which has not been repaid.

Condition precedent to the surety’s liability

Where there is a condition precedent to the surety’s liability, he will not be liable
unless that condition is first fulfilled. Section 144 is based on this principle to an
extent. For example, when an individual gives a guarantee to undertake a task unless
another individual joins as a co-surety, the guarantee will be invalid if another co-surety
does not join the contract.

In the National Provincial Bank of England v. Brackenbury (1906), a guarantee was

signed by the defendant. The defendant signed the contract on the condition that three
more individuals would also sign the contract, as part of a joint and several guarantees.
However, one of the three individuals did not sign the contract of guarantee. The Court
held that no agreement took place since there was a condition to the contract that was
not fulfilled. Hence, the defendant was held not liable.

The extent of liability of surety

It is still a critical issue to measure the maximum extent of surety’s liability and to
what extent it is being invoked presently. Herein the question is at what time the
surety’s liability comes under scrutiny- when the debtor has not fulfilled their part of
the promise of all the remedies that have been availed by the creditor against the
debtor.

Is the creditor bound to exhaust his remedies before suing the surety?

The surety’s liability is not removed in case of the omission of the creditor in suing the
borrower. The creditor does not have to necessarily exhaust his remedies against the
principal debtor before they sue the surety. They can still maintain a suit if no
proceedings have been initiated beforehand against the borrower. However, the surety
cannot be held liable until the contingency takes place.

Difficulties arise in interpreting the principle of co-extensiveness when the surety has
guaranteed performing a contractual liability to make payments by way of instalments
to the creditor.

Prominent case laws-

The principle of co-extensiveness was enforced in the following cases of Bank of Bihar
Ltd v. Damodar Prasad and Another (1968) wherein the Supreme Court explained how
the sole condition required was to demand the payment of the principal debtor’s liability
for the implementation of the bond. On the fulfilment of the condition and despite
constant demands, both the principal debtor and the surety did not fulfil their end of
the contract.

The liability being co-extensive and immediate made the surety liable to pay the whole
sum in question. There was no delay and no anticipation for the remedies to be
extinguished by the creditor against the principal debtor.

A similar judgment was held in State Bank of India v. Indexport Registered (1992),
wherein the Supreme Court explained how the surety solely because of the creditor’s
omission in initiating proceedings against the surety does not become free from their
liability to pay the debt. It was reinstated that the creditor is not confined to having
his remedies and a suit is still maintainable before suing the principal debtor.

The Supreme Court explained how prima facie there can be proceedings against the
surety despite the absence of demand and without proceeding against the principal
debtor first. They explained the lack of any such prerequisite for the creditor to
request payment from the principal debtor or sue him for not fulfilling his part of the
promise and they can directly initiate proceedings against the surety unless it has been
expressly stipulated in the contract.

In the case of Hukumchand Insurance Co Ltd v. Bank of Baroda (1977), the Karnataka
High Court observed the nature and the incidents that occurred are the two main factors
which decide the liability, the extent, and the manner of the enforcement. Although the
principal debtor and the surety’s liability arise from the same bargain, the two liabilities
are not alike. These principles laid down were further reinforced in many cases.

It is the choice of the creditor which remedy they find fit to pursue and neither the
defaulter nor the surety can compel the creditor in any manner and advise them to take
recourse to a particular remedy. It falls in the exclusive domain of the creditor.

A suit against the principal debtor alone

The creditor can initiate a suit against the principal debtor alone without initiating any
proceedings against the surety. In Union Bank of India v. Noor Dairy Farms (1996),
it was held that such a suit would be maintainable. The liability of the surety in a contract
of guarantee is not absolved on the dismissal of a suit against the principal debtor.

A suit against surety alone

A suit against the surety without initiating proceedings against the principal debtor has
been held to be maintainable. In N. Narasimhaiah v. Karnataka State Financial
Corporation (2004), the creditor showed sufficient reasons for not proceeding against
the principal debt in his affidavit. A contract of guarantee was made enforceable by the
terms stipulated against the guarantors severally and jointly with that of the principal
debtor’s company. The Court held that the creditor has the option to sue the company
and the surety as co-defendants or the surety alone.

Death of principal debtor

In case of the death of the principal debtor, any suit against him would be void ab
initio. However, the surety would not be discharged of his liability to pay the amount.

In Orissa Agro Industries Corpn Ltd v. Sarbeswar Guru,(1985), it was held that the
dismissal of the suit against the principal debtor, under Order 1 of Code of Civil
Procedure, 1908 would not automatically absolve the surety of its liability.

Surety’s right to limit his liability or make it conditional

The surety may put a restriction on the extent of his liability in the agreement. He can
expressly declare his guarantee to a fixed amount and in such a case the surety cannot
be liable for any amount beyond the fixed amount.

The principal debtor owes a greater amount but it is not the responsibility of the
surety to be responsible for even a single rupee more than what was stated in the
agreement. For example, in Hobson v Bass (1871) the surety expressly declared that
“my liability under this guarantee shall not at any time exceed the sum of £250“.
A contract of guarantee is a contract to perform the promise or discharge the liability
of a third party in case of their default. There are two types of contract of guarantee:
specific and continuing.

i. A specific contract of guarantee is given for a single transaction or debt and is

terminated when the guaranteed debt is paid or the promise is fulfilled. For
example, A guarantees to B that C will repay a loan of Rs. 10,000 to B within a
month. This is a specific contract of guarantee.
ii. A continuing contract of guarantee extends to a series of transactions or debts
and is not terminated by the discharge of a single debt or promise. Section 129
of the Indian Contract Act, of 1872 defines a continuing guarantee as a
contract of guarantee that extends to a series of transactions or debts and is
not terminated by the discharge of a single debt or promise. For example, A
guarantees to B that C will pay for all the goods that B supplies to C from time
to time. This is a continuing guarantee.
• A continuing contract of guarantee can be further classified into two types:
prospective and retrospective.
a) A prospective contract of guarantee is given for future debts or
transactions and is effective from the date of the contract or a
specified date. For example, A guarantees to B that C will pay for all
the goods that B will supply to C in the next six months. This is a
prospective contract of guarantee.
b) A retrospective contract of guarantee is given for existing debts or
transactions and is effective from a date before the date of the
contract. For example, A guarantees to B that C will pay for all the
 goods that B has already supplied to C before the date of the
contract. This is a retrospective contract of guarantee.

Liability of the surety continuing guarantee contract

The principle of Surety’s liability is given down under Section 128 of the Indian
Contract Act, 1972 which states that the liability of the Surety is co-extensive along
with that of the Principal Debtor unless it is otherwise provided by the contract. The
Surety continues to be liable for transactions given by the Creditor to the Principal
Debtor. The Surety is liable for any amount due from time-to-time dealings or
transactions between the Creditor and the Principal Debtor. The Surety is discharged
from his liability when he revokes his guarantee. Liability of the Surety is secondary to
the contract and consequently, if the principal debtor is not liable, the surety will also
not be liable.

Different modes of revocation continuing guarantee contract

By giving a Notice – when a transaction has been made and it is in progress, the
Surety’s liability with regards to that particular transaction cannot be cancelled or
revoked. It applies to future transactions only. A Surety cannot revoke/waive off his
liability just by giving notice. If a contract of guarantee involves a clause of a certain
time duration that is required to be met out before the contract can be revoked or
stand cancelled, then at no chance can the Surety cannot avoid the liabilities. It is
given under section 130 ICA 1872.

In the case Offord v. Davies, the surety had guaranteed the repayment of bills that
were to be discounted by the Creditor for the Debtor. It was to be done for 1 year up
to the amount of $600. The Creditor continued to discount the bills even when the
Surety had revoked his guarantee before any bill was discounted, the Debtor defaulted
on paying bills. “It was held that the surety was not liable for the bills discounted after
he revoked the guarantee.”

On the death of the Surety – a continuing guarantee contract comes to an end by the
death of the Surety. It automatically stands revoked as regards future transactions.
However, the Surety’s heirs can be held liable for those transactions that were made
before his death. If there is any provision in the respective contract of guarantee
stating that on Surety’s death, his property or legal representatives or heirs or agents
can be held responsible and liable for any liability or breach incurred, then it would be a
contract contrary to the meaning of Section 131 of the Indian Contract Act, 1972, and
the guarantee is not revoked even after the death of the Surety.

In Durga Priya Chowdhury v. Durga Pada Roy, the Surety gave a guarantee for the
collection and the payment of rent of the Creditor’s Zamindari by the Principal Debtor.
An amount of Rs. 600 along with the consideration of the employment of the Principal
Debtor as an agent was put forth. Later, on the death of the Surety, the Principal
debtor defaulted and the creditor sued him and the legal representatives of the
Surety. The legal representatives of the Surety pleaded that being a continuing
guarantee, it stood cancelled automatically with the death of the Surety. “The
provisions of the guarantee stated that the heirs and the representatives of the
Surety would be bound and liable by the terms of the guarantee in the same way as the
surety was bound by it. The learned judges held that the guarantee was not revoked
even after the death of the Surety and his heirs were liable.”

Rights of Surety

1. Against the Principal debtor

a) The right of surety on payment of debt or the Right of subrogation (Section
140)

The right of subrogation means that since the surety had given a guarantee to the
creditor and the creditor after getting the payment is out of the scene, the surety will
now deal with the debtor as if he is a creditor. Hence the surety has the right to
recover the amount which he has paid to the creditor which may include the principal
amount, costs and the interest.

b) The right of Indemnity (Section 145)

In every contract of guarantee, there is an implied promise by the principal debtor

to indemnify the surety, and the surety is entitled to recover from the principal
debtor whatever sum he has rightfully paid under the guarantee. This is because
the surety has suffered a loss due to the non-fulfilment of promise by the principal
debtor and therefore the surety has a right to be compensated by the debtor

Illustration

Luthra and Co has taken a loan from Khaitan and Co where Amarchand acts as security
on behalf of Luthra. Khaitan demands payment from Amarchand and on his refusal sues
him for the amount, Amarchand defends the suit as having reasonable grounds for doing
so, but he is compelled to pay the amount of the debt with costs. He can recover from
Luthra the amount paid by him for costs, as well as the principal debt.

2. Against the Creditor

a. Right to securities given by the principal debtor (section 141)

On the default of payment by the principal debtor, when the surety pays off the debt
of the principal debtor he becomes entitled to claim all the securities which were given
by the principal debtor to the creditor. The Surety has the right to all securities
whether received before or after the creation of the guarantee and it is also
immaterial whether the surety knows those securities or not.

Illustration

On the guarantee of Priya, Anita lent Rs 100000 to Sita. This debt is also secured by
security for the debt which is the lease of Sita’s house. Sita defaults in paying the
debt and Priya has to pay the debt. On paying off Sita’s liabilities Priya is entitled to
receive the lease deed in her favour.

b. Right to set off

When the creditor sues the surety for the payment of principal debtor’s liabilities, the
surety can claim set off, or counterclaim if any, which the principal debtor had against
the creditor.

3. Against the Co-sureties

a. Release of one co-surety does not discharge others (Section 138)

When the repayment of debt of the principal debtor is guaranteed by more than one
person they are called Co-sureties and they are liable to contribute as agreed towards
the payment of guaranteed debt. The release by the creditor of one of the co-sureties
does not discharge the others, nor does it free the released surety from his
responsibility to the other sureties. Thus, when the payment of a debt or performance
of duty is guaranteed by co-sureties and the principal debtor has defaulted in fulfilling
his obligation and thus the creditor compels only one or more of the co-sureties to
perform the whole contract, the co-surety sureties performing the contract are
entitled to claim contribution from the remaining co-sureties.

b. Co-sureties to contribute equally (Section 146)

According to Section 146, in the absence of any contract to the contrary, the
cosureties are liable to contribute equally. This principle will apply even when the
liability of co-sureties is joint or several, whether under the same or different
contracts, and whether with or without the knowledge of each other.

Illustration

A, B, C, and D are co-sureties for a debt of Rs. 2,0000 lent by Z to R. R defaults in

repaying the loan. A, B, C, and D are liable to contribute Rs. 5000 each.
 c. Liability of co-sureties bound in different sums (Section 147)

When the co-sureties have agreed to guarantee different sums, they have to
contribute equally subject to the maximum amount guaranteed by each one.

Illustration

A, B and C, sureties for D, enter into three separate bonds, each with a different
penalty, A for Rs. 10,000, B for Rs. 20,000 and C for Rs. 40,000. D makes a default to
the extent of Rs. 30,000. A B and C are liable to pay Rs. 10,000 each. Suppose this
default was to the extent of Rs. 40,000. Then A would be liable for Rs. 10,000 and B
and C Rs. 15,000 each.
Discharge of Surety from Liability

Under any of the following circumstances, a surety is discharged from his liability:

i) by the revocation of the contract of guarantee,

ii) by the conduct of the creditor, or iii) by the

invalidation of the contract of guarantee

By the conduct of the creditor:

1) Variance in terms of the contract (Section 133)

When a contract of guarantee has been materially altered through an agreement

between the creditor and principal debtor, the surety is discharged from his liability.
This is because a surety is liable only for what he has undertaken in the guarantee and
any alteration made without the surety’s consent will discharge the surety as to
transactions after the variation.

Illustration

A becomes surety to C for B’s conduct as a manager in C’s bank. Afterwards, B and C
contract, without A’s consent, that B’s salary shall be raised, and that he shall become
liable for one-fourth of the losses on overdrafts. B allows a customer to overdraw, and
the bank loses a sum of money. A is discharged from his suretyship by the variance
made without his consent and is not liable to make good this loss.

2) Release or discharge of the principal debtor (Section 134)

A surety is discharged if the creditor makes a contract with the principal debtor by
which the principal debtor is released or by any act or omission of the creditor, which
results in the discharge of the principal debtor.

Illustration

A supplies goods to B on the guarantee of C. Afterwards B becomes unable to pay and

contracts with A to assign some property to A in consideration of his releasing him
from his demands on the goods supplied. Here, B is released from his debt, and C is also
discharged from his suretyship. But, where the principal debtor is discharged of his
debt by operation of law, say, on insolvency, this will not operate as a discharge of the
surety.

3) Arrangement between principal debtor and creditor

According to section 135 when the creditor, without the consent of the surety, makes
an arrangement with the principal debtor for composition, or promises to give him time
to, or not to sue him, the surety will be discharged. However, when the contract to
allow more time to the principal debtor is made between the creditor and a third party,
and not with the principal debtor, the surety is not discharged (Section 136).
Illustration

C, the holder of an overdue bill of exchange drawn by A as surety for B, and accepted
by B, contracts with M to give time to B, A is not discharged.

4) Loss of security (Section 141)

If the creditor parts with or loses any security given to him at the time of the
guarantee, without the consent of the surety, the surety is discharged from liability to
the extent of the value of the security.

Illustration

A, as surety for B, makes a bond jointly with 3 to C to secure a loan from C to B. Later
on, C obtains from B further security for the same debt. Subsequently, C gives up
further security. A is not discharged.

By Invalidation of the Contract

A contract of guarantee, like any other contract, may be avoided if it becomes void or
voidable at the option of the surety. A surety may be discharged from liability in the
following cases:

1) Guarantee obtained by misrepresentation (Section 142)

When a misrepresentation is made by the creditor or with his knowledge or consent,

relating to a material fact in the contract of guarantee, the contract is invalid

2) Guarantee obtained by concealment (Section 143)

When a guarantee is obtained by the creditor keeping silent regarding some material
part of circumstances relating to the contracts, the contract is invalid

3) Failure of co-surety to join a surety (Section 144)

When a contract of guarantee provides that a creditor shall not act on it until another
person has joined in it as a co-surety, the guarantee is not valid if that other person
does not join.
The relevant sections of the Indian Contract Act, of 1872 that address situations
where a surety is not discharged from its liability:

i. Section 136: Surety Not Discharged When Agreement Made with Third Person
to Give Time to Principal Debtor: When the creditor agrees with a third person
(not the principal debtor) to extend the time for repayment or performance, the
surety remains liable.
Example: If the creditor agrees with a third party to give additional time to the
principal debtor to repay a loan, the surety’s obligation remains intact.

ii. Section 137: Creditor’s Forbearance to Sue Does Not Discharge Surety: If
the creditor refrains from suing the principal debtor, the surety’s liability is not
automatically discharged. The surety remains bound by the terms of the
guarantee even if the creditor does not take legal action against the principal
debtor.
Example: If the creditor decides not to file a lawsuit against the principal
debtor, the surety is still responsible for fulfilling the guarantee.

iii. Section 138: Release of One Co-Surety Does Not Discharge Others: If there
are multiple co-sureties (more than one person guaranteeing the same debt), the
release or discharge of one co-surety does not automatically free the others
from their obligations. Each co-surety’s liability remains separate, and the
discharge of one does not affect the liability of the remaining co-sureties.
Example: If one co-surety is released due to a separate agreement, the other co-
sureties are still bound by their guarantees.