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CMA Foundation · Fundamentals of Business Laws and Business Communication · Discharge of Contracts

Rahul agrees to build a house for Sanjay within a stipulated time at a fixed price, Sanjay to supply the necessary timber. Vikram guarantees Rahul's performance. Sanjay omits to supply the timber and the work cannot proceed. Which statement is correct?

Vikram is discharged. A surety is freed by any act or omission of the creditor whose legal consequence is the discharge of the principal debtor. Sanjay's failure to supply the timber discharges Rahul from the work, and therefore Vikram's guarantee also ends.

  1. AVikram is discharged from his suretyship because of the creditor's omissionCorrect
  2. BVikram remains liable, as Rahul failed to complete the house
  3. CVikram remains liable unless Rahul consents to the omission
  4. DVikram is discharged only if he gives notice to Sanjay

Explanation

Under Section 134, the surety is discharged by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. Sanjay's failure to supply timber discharges Rahul from performing, and so discharges Vikram, as shown in illustration (c). Rahul's non-completion is caused by Sanjay's omission, so the second option is wrong.

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