contract of continuing guarantee and its revocation

  1. A guarantee which extends to a series of transactions 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 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 to above the value of $ 100, and C pays B for it. Afterwards B supplies C with tea to 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 fours sacks to C, which C does not pay for. The guarantee given by A was not a continuing guarantee, and according ly he is not liable for the price of the four sacks.

 

Revocation of continuing guarantee.

  1. 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 dishonours the bill at maturity. A is liable upon his guarantee.

 

Revocation of continuing guarantee by surety’s death.

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

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