A surety is a person who guarantees the performance of a contractual obligation by another party. Once a surety has fulfilled their obligations, they are entitled to be discharged from the contract.
Common Modes of Discharge of Surety
- Performance: The surety may be discharged if the principal debtor performs their obligations as per the terms of the contract. In such a case, the surety’s obligation to perform is also discharged.
- Mutual agreement: The surety and the creditor may mutually agree to discharge the surety from the contract. This agreement may be made in writing or verbally, but it is preferable to have a written agreement to avoid any future disputes.
- Release: If the creditor releases the principal debtor from their obligations under the contract, the surety is also discharged from their obligations.
- Discharge by operation of law: A surety may be discharged from their obligations by operation of law in certain circumstances. For example, if the creditor alters the terms of the contract without the consent of the surety, the surety may be discharged from their obligations.
- Bankruptcy of the principal debtor: If the principal debtor becomes bankrupt, the surety may be discharged from their obligations unless the creditor agrees to continue with the contract.
- Death of the surety: The surety’s obligations are personal to them, and they cannot be passed on to their legal heirs after their death. Therefore, the surety is automatically discharged from the contract on their death.
