CA Foundation Exam > CA Foundation Questions > Surety stands discharged:a)by an agreement be...
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Surety stands discharged:
- a)by an agreement between the creditor and the principal debtor
- b)by an agreement between the creditor & a third party for not to sue the principal debtor
- c)both (a) & (b) above
- d)neither (a) nor (b).
Correct answer is option 'A'. Can you explain this answer?
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Surety stands discharged:a)by an agreement between the creditor and th...
Explanation:
- Surety stands discharged:
- When there is an agreement between the creditor and the principal debtor, the surety stands discharged. This means that the surety is released from their obligations as the guarantor.
- Such an agreement implies that the creditor has agreed to release the surety from their obligations, usually because the principal debtor has fulfilled their obligations or the creditor has agreed to a new payment arrangement directly with the principal debtor.
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Surety stands discharged:a)by an agreement between the creditor and th...
Understanding Surety Discharge
In the context of contracts, a surety is someone who agrees to take responsibility for the debt or obligation of another. Knowing when a surety is discharged from this responsibility is crucial.
Discharge by Agreement
- A surety can be discharged by an agreement between the creditor and the principal debtor.
- This means if the creditor and the principal debtor agree to modify or release the terms of the contract, the surety is no longer liable.
- This release can occur without the surety's consent, as their obligation is tied to the original agreement between the creditor and the debtor.
Discharge by Third Party Agreement
- The option that mentions an agreement between the creditor and a third party not to sue the principal debtor does not automatically discharge the surety.
- The surety's liability remains unless specified otherwise in the contract, as the third party's agreement does not directly impact the surety's obligations.
Conclusion
- Therefore, the correct answer is option 'A' because the surety is effectively discharged from liability when there is an agreement between the creditor and the principal debtor.
- Understanding the nuances of suretyship is vital for anyone involved in financial agreements or contracts, especially in the CA Foundation context.
In summary, the relationship and agreements between the creditor and the principal debtor play a pivotal role in determining the discharge of a surety.
In the context of contracts, a surety is someone who agrees to take responsibility for the debt or obligation of another. Knowing when a surety is discharged from this responsibility is crucial.
Discharge by Agreement
- A surety can be discharged by an agreement between the creditor and the principal debtor.
- This means if the creditor and the principal debtor agree to modify or release the terms of the contract, the surety is no longer liable.
- This release can occur without the surety's consent, as their obligation is tied to the original agreement between the creditor and the debtor.
Discharge by Third Party Agreement
- The option that mentions an agreement between the creditor and a third party not to sue the principal debtor does not automatically discharge the surety.
- The surety's liability remains unless specified otherwise in the contract, as the third party's agreement does not directly impact the surety's obligations.
Conclusion
- Therefore, the correct answer is option 'A' because the surety is effectively discharged from liability when there is an agreement between the creditor and the principal debtor.
- Understanding the nuances of suretyship is vital for anyone involved in financial agreements or contracts, especially in the CA Foundation context.
In summary, the relationship and agreements between the creditor and the principal debtor play a pivotal role in determining the discharge of a surety.
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