Indian Contract Act,1872

Act No : 9

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Section : Surety's right to benefit of creditor's securities

141.Surety's right to benefit of creditor's securities.-A suretyis entitled to the benefit of every security which the creditor hasagainst the principal debtor at the time when the contract ofsuretyship is entered into, whether the surety knows of the existenceof such security or not ; and, if the creditor loses, or, without theconsent of the surety, parts with such security, the surety isdischarged to the extent of the value of the security. Illustrations (a)C advances to B, his tenant, 2,000 rupees on the guarantee ofA. C has also a further security for the 2,000 rupees by a mortgage ofB's furniture. C cancels the mortgage. B becomes insolvent, and Csues A on his guarantee. A is discharged from liability to the amountof the value of the furniture. (b)C, a creditor, whose advance to B is secured by a decree,receives also a guarantee for that advance from A. C afterwards takesB's goods in execution under the decree, and then, without theknowledge of A, withdraws the execution. A is discharged. (c)A, as surety for B, makes a bond jointly with B to C, tosecure a loan from C to B. Afterwards, C obtains from B a furthersecurity for the same debt. Subsequently, C gives up the furthersecurity. A is not discharged.

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