According to Indian Contract Act 1872, Surety not discharged when.....

1) Surety not discharged when agreement made with third person to give time to Principal Debtor(Section 136 of ICA) :

            Where a contract to give time to the principal debtor is made by the creditor with a third person, and not with the principal debtor, the surety is not discharged.

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.


2) Creditor's forbearance to sue does not discharge Surety (Section 137) :

           Mere forbearance on the part of the creditor to sue the principal debtor or to enforce any other remedy against him, does not, in the absence of any provision in the guarantee to the contrary, discharge the surety.

Illustration : 

             B owes to C a debt guaranteed by A. The debt becomes payable, C does not sue B for a year after the debt has become payable. A is not discharged from his surety.


3) Release of one Co-Surety does not discharge other
(section 138)

        where there are co-sureties, a release by the creditor of one of them does not discharge the others, neither does if free the surety so released from his responsibility to the other sureties.

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