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Which of the following is NOT a way a surety is discharged from liability?
AThe creditor varies the terms of the contract without the surety's consent
BThe creditor releases the principal debtor
CThe principal debtor takes a vacation
DThe creditor compounds with or gives time to the principal debtor
Answer & Solution
Correct answer: C. The principal debtor takes a vacation
1. The Act lists discharge of surety by act or conduct of the creditor: variation, release of debtor, compounding/giving time, impairment of remedy, loss of security.
2. These all alter the surety's position without consent and therefore discharge.
3. A vacation by the principal debtor does not alter the contract terms or impair the surety's remedy.
_Source: ICMAI BoS CMA Foundation Paper 1 (Business Laws), Module 2 §2.7 (Indemnity/Guarantee/Pledge/Agent), p. 91-99_
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