Q: 'A' contracts with 'B' for a fixed price to build a house for 'B' within a stipulated time. 'B' supplying necessary timber, 'C' guarantees 'A's performance of the contract. 'B' omits to supply the timber. 'A' could not perform the contract. What is the liability of 'C'?

Ans: There is no liability to C. Sec. 139 of the Indian Contract Act, 1872 specifies that if the Creditor does any act inconsistent with the right of the Surety or omits to do some act which is his duty to do, thereby affecting the remedy of the Surety against the Principal Debtor, then the Surety is discharged.

In the instant case, A is the principal debtor; B is the Creditor and C, the guarantor or Surety. A's contract with B is for building a house for a specific price within a stipulated time. However, C's guarantee in respect of A's completion of work within the stipulated time period is based on the supply of timber by B.

In the above case, B omits to do his required act of supply of timber to A which in turn led to the non-performance of the contract by A. Therefore, C is not liable for the non-performance of C.