Section 139 of the Indian Contract Act, 1872: Discharge of Surety When Creditor Impairs the Surety's Remedy

Section 139 protects a surety where the creditor, by an inconsistent act or by failing to perform a duty owed to the surety, impairs the surety's eventual remedy against the principal debtor. In that situation, the surety is discharged.

What Section 139 means

A surety is the person who gives a guarantee for the performance of an obligation by the principal debtor to the creditor. These expressions form part of the law of guarantee under Section 126 of the Indian Contract Act, 1872.

Section 139 addresses conduct by the creditor that prejudices the surety's ability to obtain the remedy that would otherwise be available against the principal debtor. The provision therefore focuses not merely on an act or omission, but on whether that conduct impairs the surety's eventual remedy.

Text and rule under Section 139

If the creditor does an act inconsistent with the rights of the surety, or omits to do an act which the creditor's duty to the surety requires, and the surety's eventual remedy against the principal debtor is thereby impaired, the surety is discharged.

Essential requirements

For Section 139 to operate, the creditor must either act inconsistently with the surety's rights or omit an act that the creditor is duty-bound to perform for the surety. In addition, that conduct must impair the surety's eventual remedy against the principal debtor. The statutory consequence is discharge of the surety.

Statutory illustrations

Illustration (a): Prepayment under a building contract. B agrees to build a ship for C for a sum payable by instalments at specified stages. A guarantees B's due performance. C, without A's knowledge, prepays the final two instalments to B. The illustration states that A is discharged by the prepayment.

Illustration (b): Security realised through misconduct or wilful negligence. C lends money to B on a joint and several promissory note made by B and A, who is B's surety, together with security over B's furniture. C later sells the furniture but, because of misconduct and wilful negligence, obtains only a small price. The illustration states that A is discharged from liability on the note.

Illustration (c): Failure to carry out an agreed supervisory safeguard. A places M as apprentice with B and guarantees M's fidelity. B promises to check M's cash at least monthly but fails to do so, and M embezzles. The illustration states that A is not liable on the guarantee.

Relationship with nearby provisions on guarantee

Section 139 should be read with the surrounding provisions governing discharge and rights of sureties. Section 133 concerns variance in the terms of the contract; Section 134 deals with release or discharge of the principal debtor; Section 135 addresses compounding with, giving time to, or agreeing not to sue the principal debtor. Section 140 deals with the surety's rights on payment or performance, while Section 141 concerns the surety's right to the benefit of the creditor's securities.

Practical significance

In a dispute involving Section 139, attention should be given to the guarantee, the creditor's conduct, any contractual or legal duty owed to the surety, the remedy that would have been available to the surety against the principal debtor, and the manner in which the creditor's conduct allegedly impaired that remedy. Whether the statutory conditions are satisfied depends on the facts and contractual documents of the particular case.

Official text: For the current official text of the Indian Contract Act, 1872, consult the India Code portal. The official Act continues to list Section 139 under the provisions relating to guarantees.

This article is a general explanation of Section 139 and is not a substitute for advice on the facts of a particular guarantee or dispute.