Release of One Co-surety does not Discharge Other in Banking Contracts of Guarantee

In a banking contract of guarantee, there may be two or more sureties. If one of the co-sureties is released from their liability, the other co-sureties are not discharged from their liability.

This is because each co-surety is liable for the full amount of the debt, not just their share. The release of one co-surety does not change the liability of the other co-sureties.

The release of one co-surety may, however, affect the rights of the other co-sureties. For example, the surety who is released may be able to sue the creditor for contribution from the other co-sureties.

MCQs on Release of One Co-surety does not Discharge Other in Banking Contracts of Guarantee

  1. Which of the following is not a way to discharge a co-surety in a banking contract of guarantee?
    • Release by the creditor.
    • Bankruptcy of the co-surety.
    • Accord and satisfaction.
    • Death of the co-surety.
    • Answer: Release by another co-surety. The release of one co-surety does not discharge the liability of the other co-sureties.
  2. The release of one co-surety may, however, affect the rights of the other co-sureties. What are some examples of the rights that may be affected?
    • The surety who is released may be able to sue the creditor for contribution from the other co-sureties.
    • The surety who is released may be able to claim subrogation from the creditor.
    • The surety who is released may be able to claim indemnity from the other co-sureties.
  3. The surety who is released may be able to sue the creditor for contribution from the other co-sureties. What does this mean?
    • This means that the surety who is released can ask the other co-sureties to pay their share of the debt.
  4. The surety who is released may be able to claim subrogation from the creditor. What does this mean?
    • This means that the surety who is released can step into the shoes of the creditor and claim any rights that the creditor had against the principal debtor.
  5. The surety who is released may be able to claim indemnity from the other co-sureties. What does this mean?
    • This means that the surety who is released can ask the other co-sureties to reimburse them for any payments that they have made to the creditor.