Site navigation

X takes a loan of ₹ 10,00,000 from Bank A. Y signs a contract as surety, promising to pay the bank if X…

Under section 135 of the Contract Act, an agreement by the creditor to give time to the principal debtor discharges the surety unless the surety assents, so "Y is discharged…

Choose your answer

X takes a loan of ₹ 10,00,000 from Bank A. Y signs a contract as surety, promising to pay the bank if X defaults. After 3 months, Bank A agrees to reduce the interest rate and extends the repayment period by 6 months without informing Y. Subsequently, X defaults on the loan. Which of the following statements correctly describes Y’s liability under the Indian Contract Act, 1872 ?

Select one answer
Answer and explanation

Correct answer A

Under section 135 of the Contract Act, an agreement by the creditor to give time to the principal debtor discharges the surety unless the surety assents, so "Y is discharged because Bank A agreed to give X further time without Y's consent." It is not necessary for the bank first to sue the principal debtor, and the reduced interest rate does not supply the missing consent.

Practice for these exams

Related question papers

Related exam syllabi

Related questions in this topic