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It is the duty of the creditor not to do any act which is inconsistent with the contract which would result in the impairment of the remedy of the surety to recover the amount from the principal debtor after repayment. This right of the surety to discharge his liability is provided in Section 139 of the Indian Contract Act, 1872.
The above rule is in close proximity to the right of subrogation with the surety after he repays the loan. The surety takes place of the creditor after repayment and he can exercise all the rights that the creditor has and if any of the rights are impaired or the remedy against the principal debtor is impaired due to any act or omission by the creditor, it would discharge the surety.

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If there is an explicit contract which provides that the creditor will not sue in the event of default, it would result in the discharge of liability of the surety. However, mere forbearance to sue will not discharge the liability as provided under Section 137.

If the surety has agreed to such conditions, he will not be discharged from the contract as is evident from the phrase “unless the surety assents” in Section 135.

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The surety is entitled to ask the principal debtor to pay off the debt when it is the time for repayment. However, if there is a contract between the principal debtor and the creditor whereby the creditor has agreed to give some more time to pay off the debt without keeping the surety into consideration, the surety will be discharged.

However according to section 136, if the creditor enters into an agreement to give time with a third party, it does not discharge the surety from his liability.

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According to Section 135 of the Indian Contract Act, 1872, a surety can be discharged of his liability if there is any composition or a new agreement between the creditor and the principal debtor.
Composition refers to variation in the original contract and adding something up which was not present in the original contract. In case there is a composition in the contract between the debtor and the creditor without surety’s consent, it would discharge his liability.

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By release or discharge of principal debtor

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By release or discharge of principal debtor

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Section 134 of the Indian Contract Act provides for the discharge of the liability of the surety, in case the principal debtor is released from his liability to repay the amount.
Section 134 deals with the discharge of the secondary liability of the surety in case the primary liability of the principal debtor is discharged. However, the converse is not true. This means that if there is a discharge of the liability of the surety, it will not automatically discharge the liability of the principal debtor.

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A surety can be discharged from his liability if there is a variance that has been made without the consent of the surety, in case of a continuing contract of guarantee. The essential factor which determines if the liability of the surety is discharged is the concept of substantiality and materiality of the variance. The court has to decide, keeping the entire facts into consideration, whether a given variance is material or not. In case the variance in the contract leads to a benefit of the surety, the surety may not be discharged of his liability as it is within the discretion of the court with regards to the materiality of the fact.

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By Revocation of Guarantee by Surety's death

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By Revocation of Guarantee by Surety's death

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The death of the surety's operates, in the absence of  any contract to the contrary, as a revocation of continuing guarantee, so far as regards future transactions.

Few important points

In absence of any contract to the contrary, the surety should include a clause stating that after his lifetime, the surety ends

The liablilty of the deceased surety can be imposed upon his legal heirs but only to the extent of the property inherited by them.

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A continuing Guarantee may anytime be revoked by the surety, as to future transaction by notice to the creditor.
Few important points

Guarantee given for an existing debt cannot be revoked

Revocation becomes effective for future transactions only

The surety shall be liable for the transactions which have already taken place

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The Indian Contract Act, 1872 provides for the discharge of the liability of surety, in case of certain given circumstances. A surety is said to discharge from his liability if his liability to perform the promise, in case of a default by the principal debtor, comes to an end

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Agreement

Revocation by the Principal

Revocation by Agent

Completion of business of Agency

Expiry of Time

Death of the Principal or Agent

The Insanity of the Principal or Agent

Insolvency of the Principal or Agent

Destruction of Subject matter

Principal or Agent becomes Alien enemy

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Agreement

Consideration not necessary

Intention to Act on behalf of the principal

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themselves might not be competent enough to contract, have the capacity to represent and bind their principals into direct and valid contractual relationships

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should be capable of performing the tasks, which he wants his agent to do for him

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1.Defined under Sec. 182 of the Indian Contract Act, 1872
2.The act defines an agent as an individual who has been employed by another to act/deal on behalf of him and the person who employs the agent.
3.Enable the principal to sue or be sued by any third party directly.

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In the same manner as the surety id discharged

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By death of surety

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•	Prototype
•	Guidelines to use
•	Analyzed data 
•	Product Development Team
•	Department heads, CEO, Software team, Fitness in-charge

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By notice of revocation

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A guarantee that extends to a series of transactions.

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A guarantee applicable in respect of a single debt or a specific transaction.

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Anything done or any promise made, for the benefit of the principal debtor, may be sufficient consideration to the surety for giving guarantee.

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As per Section 126 of the Indian Contract Act, it is a contract to perform the performance, or discharge the liability, of the third person in case of his default.

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COMMENCEMENT OF LIABILITY OF PROMISOR/ INDEMNIFIER

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COMMENCEMENT OF LIABILITY OF PROMISOR/ INDEMNIFIER

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1. Indemnifier is not liable until the indemnified has suffered the loss.

2. Indemnified can compel the indemnifier to make good his loss although he has not discharged his liability.

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1.      RIGHT TO RECOVER DAMAGES PAID IN A SUIT [SECTION 125(1)]

2.      RIGHT TO RECOVER COSTS INCURRED IN DEFENDING A SUIT [SECTION 125(2)

3.      RIGHT TO RECOVER SUMS PAID UNDER COMPROMISE [SECTION 125(3)]:

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1.      PARTIES TO A CONTRACT

2.      PROTECTION OF LOSS

3.      EXPRESS OR IMPLIED

4.      ESSENTIALS OF A VALID CONTRACT

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1. The promisor or indemnifier

2. The promisee or the indemnified or indemnity-holder

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The objective of entering into a contract of indemnity is to protect the promisee against unanticipated losses.

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According to Section 124,
"A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of indemnity".

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1. Duty to repay the debt or perform the promise
2. Duty to disclose defects in the goods pledged
3. Duty to meet extraordinary expenses

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1. Take reasonable care of the goods pledged
2. Not to make personal use of the goods pledged
3. Not to mix goods pledged with his own goods
4. To return the goods pledged after the debt has been paid or the
promise has been performed
5. Not to commit any act that is inconsistent with the terms of pledge
6. To deliver accretion, if any, to the goods pledged.

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Essentials of Pledge:
1. Delivery of goods
2. Delivery of goods should be by way of security: The security being for the payment of debt or the performance of a promise.
3. Goods must be movable: An implied condition to return the goods.

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Bailment of goods as security for the repayment of a debt or performance of a promise.

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1. Take reasonable care of goods
2. No unauthorized use of goods bailed
3. Do not set up jus tertii
4. Return goods

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1.Disclose faults
2. Repay Bailee's Expense
3.Indemnify the Bailee
4. Compensate bailee for breach of warranty
5. Claim back Goods

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Non-Gratuitous Bailment (Mutual Benefit and some considerations) 

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Non-Gratuitous Bailment (Mutual Benefit and some considerations) 

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1. Exclusive benefit of Bailor
2. Exclusive Benefit of Bailee

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1. Contract: Bailor & Bailee
2. Subject Matter: Goods i.e. Movable Property other than money
3. Delivery of Goods: Change of Possession temporarily & Voluntarily
4. Delivery: Actual & Constructive
5. No change in Ownership
6. Purpose for transfer of Possession
7. Return of Goods

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Entrust possession of movable goods by owner to another person for a purpose