Rights & Discharge of the Surety — KSLU Contract 2 Notes

Rights & Discharge of the Surety

flowchart TD
    A["Surety"]:::root
    A --> B["Rights against the PRINCIPAL DEBTOR<br/>(subrogation S.140, indemnity S.145)"]:::leaf
    A --> C["Rights against the CREDITOR<br/>(securities S.141)"]:::leaf
    A --> D["Rights against CO-SURETIES<br/>(contribution Ss.146-147)"]:::leaf
    A --> E["DISCHARGED by: variance (S.133),<br/>release of debtor (S.134), creditor's<br/>arrangement (S.135), loss of security (S.141)"]:::no

    classDef root fill:#FFF8DC,stroke:#333,color:#000;
    classDef leaf fill:#E6F3FF,stroke:#1E3A8A,color:#000;
    classDef no fill:#FFE6E6,stroke:#8A1E1E,color:#000;
    linkStyle default stroke:#888,stroke-width:1px;

On paying the debt the surety steps into the creditor’s shoes (subrogation, S.140) and may claim indemnity from the principal debtor (S.145) and the benefit of the creditor’s securities (S.141). He is discharged by: revocation (for future transactions in a continuing guarantee — S.130); the principal debtor’s death; variance in the terms without his consent (S.133 — Bonar v. Macdonald); release or discharge of the principal debtor (S.134); the creditor’s composition, promise to give time, or promise not to sue the debtor (S.135); and the creditor’s act impairing the surety’s eventual remedy or losing a security (S.139, S.141). A continuing guarantee (S.129) covers a series of transactions and may be revoked as to future ones by notice (S.130). Co-sureties are liable to contribute equally (S.146), or in proportion to limits agreed (S.147).