1) Introduction 
     
       Chapter VIII, Section 129 to Section 131 of the Indian Act, 1872 lay down the provisions relating to "Continuing Guarantee" Section 129 of the Indian Contract Act defines Continuing Guarantee. Sections 130, 131 and Section 133 of the said Act deals with revocation of continuing guarantee. Continuing guarantee can be revoked by notice , by death of the surety and by variance in the terms of the contract between debtor and creditor.  
 
2) Meaning and Definition of Continuing Guarantee

    Section 129 of Indian Contract Act 1872 defines 'Continuing Guarantee' as "A guarantee which extends to a series of transaction, is called, a “continuing guarantee”.

Illustrations

     (a) A, in consideration that B will employ C in collecting the rents of B’s zamindari, promises B to be responsible, to the amount of 5,000 rupees, for the due collection and payment by C of those rents. This is a continuing guarantee.

    (b) A guarantees payment to B, a tea-dealer, to the amount of £ 100, for any tea he may from time to time supply to C. B supplies C with tea of above the value of £ 100, and C pays B for it. Afterwards, B supplies C with tea of the value of £ 200. C fails to pay. The guarantee given by A was a continuing guarantee, and he is accordingly liable to B to the extent of £ 100.

    (c) A guarantees payment to B of the price of five sacks of flour to be delivered by B to C and to be paid for in a month. B delivers five sacks to C. C pays for them. Afterwards B delivers four sacks to C, which C does not pay for. The guarantee given by A was not a continuing guarantee, and accordingly he is not liable for the price of the four sacks.


3) Revocation of Continuing Guarantee  :

A continuing guarantee can be revoked in the following ways.

(a) By notice (Section.130)

(b) By death of the Surety (Section.131)

(c)  By variance in the terms of the contract between debtor and creditor. (Section.133)

(A) Revocation of Continuing Guarantee by notice to Creditor (Section 130)  

      According to Section 130 of Indian Contract Act 1872,  A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.



Illustrations 

          (a) A, in consideration of B’s discounting, at, A’s request, bills of exchange for C, guarantees to B, for twelve months, the due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the end of three months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A is liable to B for the 2,000 rupees, on default of C.

          (b) A guarantees to B, to the extent of 10,000 rupees, that C shall pay all the bills that B shall draw upon him. B draws upon C, C accepts the bill. A gives notice of revocation. C dishonors the bill at maturity. A is liable upon his guarantee.



(B)  Revocation of continuing guarantee by surety's death  (Section 131) :
     Section 131 of the Indian Contract Act 1872 deals with Revocation of Continuing Guarantee by surety's death. Section 131 reads as follows -

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


(C) By variance in the terms of the contract between debtor and creditor. (Section.133)

 Section 133 of the said Act runs as follows :

      Discharge of surety by variance in terms of contract Any variance made without the surety’s consent, in the terms of the contract between the principal debtor and the creditor, discharges the surety as to transactions subsequent to the variance .

 Illustrations 

 (a) A becomes surety to C for B’s conduct as manager in C’s bank. Afterwards, B and C contract, without A’s consent, that B’s salary shall be raised, and that he shall become liable for one-fourth of the losses on overdrafts. B allows a customer to over-draw, and the bank loses a sum of money. A is discharged from his suretyship by the variance made without his consent, and is not liable to make good this loss.

(b) A guarantees C against the misconduct of B in an office to which B is appointed by C, and of which the duties are defined by an Act of the Legislature. By a subsequent Act, the nature of the office is materially altered. Afterwards, B misconducts himself. A is discharged by the change from future liability under his guarantee, though the misconduct of B is in respect of a duty not affected by the later Act.


 (c) C agrees to appoint B as his clerk to sell goods at a yearly salary, upon A’s becoming surety to C for B’s duly accounting for moneys received by him as such clerk. Afterwards, without A’s knowledge or consent, C and B agree that B should be paid by a commission on the goods sold by him and not by a fixed salary. A is not liable for subsequent misconduct of B.


 (d) A gives to C a continuing guarantee to the extent of 3,000 rupees for any oil supplied by C to B on credit. Afterwards B becomes embarrassed, and, without the knowledge of A, B and C contract that C shall continue to supply B with oil for ready money, and that the payments shall be applied to the then, existing debts between B and C. A is not liable on his guarantee for any goods supplied after this new arrangement.


 (e) C contracts to lend B 5,000 rupees on the 1st March. A guarantees repayment. C pays the 5,000 rupees to B on the 1st January, A is discharged from his liability, as the contract has been varied, inasmuch as C might sue B for the money before the first of March.


4) Conclusion 

            Section 129 of Indian Contract Act 1872 deals with Continuing Guarantee, it says that "A guarantee which extends to a series of transaction, is called, a “continuing guarantee”. A continuing guarantee may be revoked three ways i) by notice ii) By death of the Surety iii) By variance in the terms of the contract between debtor and creditor.


See also : 

1) Revocation of continuing guarantee by change in firm

2) Distinction / Difference between Contract of Indemnity and Guarantee

3) Distinction/ Difference between Bailment and Pledge

4) Contingent Contracts

5) Contract of indemnity

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