According to Section 129, “A guarantee which
extends to a series of transactions Is called a continuing guarantee.” For
example-
i)A, in consideration that B will
employ C in collecting rents of B’s zamindari, promises B to be responsible to
the amount of 5000 rupees for the due collection and payment by C of those
rents. This is a continuing guarantee.
ii) A guarantees payment to B, a tea
dealer, to the amount of Rs. 100 for any tea he may from time to time supply to
C. B supplies C with tea of more than the value of Rs. 100 and C pays B for it.
Afterwards B supplies C with tea to the value Rs. 200. C fails to pay. The
guarantee given by A was a continuing guarantee, and he is accordingly liable
to B to the extent for Rs. 100.
iii) 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 guarantees given by A was not a
continuing guarantee, and accordingly he is not liable for the price of the
four sacks :S. 129.
Difference Between Ordinary and Continuing Guarantee:- The distinction between an
ordinary and a continuing guarantee is that under the former, the surety is
liable only in respect of a single transaction, whereas under the latter, the
surety is prima facie liable in respect of any of the successive transactions
which come within its scope.
The question whether a guarantee is
continuing or not must be ascertained by looking to the intention of the parties
and the surrounding circumstances. As said in one English case, the Court has
power “ not to alter the language, but to fill up the instrument where it is
silent and to apply it to the subject matter to which the parties intended it
to be applied.”
How Can a Continuing Guarantee be Revoked?
There are two ways in which a
continuing guarantee can be revoked-
1. BY Notice:- According to Section 130 , a continuing guarantee may
at any time, be revoked by the surety, as to future transactions, by notice to
the creditor, For Examples
i) 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 5000 rupees.
B discounts bills for C to the extent of 2000 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 of the 2000
rupees on default of C
ii) 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
draw upon C. C accepts the bill. A gives notice of revocation. A dishonours the
bill at maturity. A is liable upon his guarantee.
2. BY the Death of Surety:- According to S. 131, the death of the
surety operates (in the absence of any contract to the contrary) as a
revocation of continuing guarantee, so far as regards future transactions.
Future Transaction:- It is significant to note that a continuing guarantee can be revoked
as to the future transactions only.
Courtesy:- Legal Point Foundation
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