Chapter VIII - Of Indemnity and Guarantee
Section 139
Section 139: Impairing the surety’s eventual remedy
A creditor’s conduct may discharge the surety where it violates the surety’s rights or a duty and impairs the eventual remedy against the debtor.
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This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged.
Illustrations
(a) B contracts to build a ship for C for a given sum, to be paid by instalments as the work reaches certain stages. A becomes surety to C for B’s due performance of the contract. C, without the knowledge of A, prepays to B the last two instalments. A is discharged by this prepayment.
(b) C lends money to B on the security of a joint and several promissory note made in C’s favour by B, and by A as surety for B, together with a bill of sale of B’s furniture, which gives power to C to sell the furniture, and apply the proceeds in discharge of the note. Subsequently, C sells the furniture, but, owing to his misconduct and wilful negligence, only a small price is realized. A is discharged from liability on the note.
(c) A puts M as apprentice to B, and gives a guarantee to B for M’s fidelity. B promises on his part that he will, at least once a month, see M make up the cash. B omits to see this done as promised, and M embezzles. A is not liable to B on his guarantee.
Rule and business relevance
The section requires both relevant creditor conduct and resulting impairment of the surety’s eventual remedy against the principal debtor. The illustrations include premature payments, negligent realisation of security and omitted promised checks.
Limits and related provisions
Identify the causal impairment rather than treating every creditor mistake as a discharge. The contractual duties and actual effect on recovery matter.
Hypothetical business example
Hypothetical example: A creditor promises monthly cash checks relevant to a fidelity guarantee, omits them and the employee embezzles. The statutory illustration links the omitted safeguard to the guarantee claim.
Practical decision flow
Identify the right infringed or duty omitted.
Explain how that conduct impaired the eventual remedy against the debtor.
Retain the agreed safeguards, chronology and recovery evidence.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Identify the right infringed or duty omitted.
- Explain how that conduct impaired the eventual remedy against the debtor.
- Retain the agreed safeguards, chronology and recovery evidence.
Avoid
- Identify the causal impairment rather than treating every creditor mistake as a discharge. The contractual duties and actual effect on recovery matter.
Glossary
- Eventual remedy
- The surety’s later means of recourse against the principal debtor.
- Impairment
- A worsening of that remedy caused by the relevant conduct.
Frequently asked questions
Is a creditor error alone sufficient?
The section also requires the surety’s eventual remedy against the debtor to be impaired.
Can failure to perform an agreed safeguard matter?
Yes. The monthly cash-check illustration addresses that situation.
Should security handling be reviewed?
Yes. The illustrations include negligent realisation of property securing the debt.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026