Is a surety liable for a change in interest rate under a contract that was not signed without the consent of the surety?
Alberta, Canada
The following excerpt is from Canadian Commercial Bank v. Otte, 1988 CanLII 3906 (AB QB):
The general rule is that a material variation of the terms of the principal contract that is made without the consent of the surety will discharge the liability of the surety -Holmes v. Brunskill, [1878] 3 Q.B.D. 495, at 505. A material variation is one that alters the risk and it has been held that a change of interest rate will discharge the surety from liability.
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