Guarantee=Discharge of surety from liability-Whether creditor's -forbearances
_ to enforce his remedies result in a discharge of the surety

When a creditor merely fails to enforce his rights immediately against
the debtor through passive inactivity, the, surety is not discharged even
though the surety was not notified of the fact the debtor had nor paid his
debts. The giving of time by the creditor can have the effect of discharg-
ing the surety only if the creditor and debtor made a new agreement.

,Civil Justice Ordinance 1929, s. 98.

• Court: Halford J.

Action

March 2, 1931. Halford J.: The first defendant admits that
he purchased a motor car with accessories from the plaintiffs for
the sum of £E.292 of which he paid £EAO in cash, the balance being
payable by 18 monthly installments of £E.14 each, of which two only
were paid and that at the time of the institution of these proceedings,
the - October, November and December installments were owing; he
further admits that, it was provided that in the event of his failure to
pay an installment at due date, the plaintiffs were entitled to claim
payment from him of the whole of the balance of the purchase price

,remaining unpaid. He has therefore no defence to the plaintiffs'
claim for £E.224.

The second defendant admits that he guaranteed the purchase
by the first defendant and payment by him to plaintiffs of the price
but proprio motu contends that as the plaintiffs failed to notify him
of the first defendant's default, he is thereby in law discharged from
his guarantee.

The law on the issue which has been raised is clearly settled.

A surety on paying the debt in respect of which the guarantee was
.given becomes entitled to the benefit of the remedies and securities
which the creditor has' against the principal debtor and if the creditor
does anything to impair such remedies and securities without the
consent of the surety, the latter will in general be discharged from his
liability. So if the creditor gives further time to the debtor without
the knowledge and consent of the surety, the latter is thereby dis-
charged, unless the creditor's rights against the surety are expressly
reserved.

But it has been laid down that in order for the giving of time by
the' creditor to have the effect of discharging the surety, there must
be either a new security given to extend the time or a binding agree-
ment -upon a sufficient consideration to suspend the remedy. The
mere fact of the creditor giving time for payment and forbearing or
neglecting to enforce his remedies against the principal debtor through
passive inactivity will not as a general rule discharge the surety, unless
in the contract between creditor and surety the former has undertaken
that he will actively enforce those remedies,

This rule of law is applicable' to the circumstances of this case.

Without being called upon to determine the question of fact as to
whether notice of the debtor's default was given by the plaintiffs to the