Contracts Act 1950 · Updated to 1 Jan 2006 · Part VIII · Of Indemnity and Guarantee
86. Discharge of surety by variance in terms of contract
Feedback & supportAny variance, made without the surety’s consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance.
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.
A guarantees C against the misconduct of B in an office to which B is appointed by C, and of which the duties are defined by law. By a subsequent law, the nature of the office is materially altered. Afterwards, B misconducts himself, A is discharged by the change from future liability under his guarantee, though the misconduct of B is in respect of a duty not affected by the later law.
C agrees to appoint B as his clerk to sell goods at a yearly salary, upon
A’s becoming surety to C for B’s duly accounting for moneys received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid by a commission on the goods sold by him and not by a fixed salary, A is not liable for subsequent misconduct of B.
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A gives to C a continuing guarantee to the extent of RM3,000 for any oil supplied by C to B on credit. Afterwards, B becomes embarrassed, and, without the knowledge of A, B and C contract that C shall continue to supply
B with oil for ready money, and that the payments shall be applied to the then existing debts between B and C. A is not liable on his guarantee for any goods supplied after this new arrangement.
C contract to lend B RM5,000 on the 1st of March. A guarantees repayment. C pays the RM5,000 to B on the 1st of January. A is discharged from his liability, as the contract has been varied, inasmuch as C might sue B for the money before the 1st of March.