“Continuing guarantee”
Chapter 9: Of indemnity and guarantee
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 rent 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 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 four sacks to C, which C does riot 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.
The Indian Contract Act, 1872 (Act No. 9 of 1872). From the updated text on India Code, with later amendments. Being checked against the official copy; amendment notes are not shown yet.
Related sections
- 126“Contract of guarantee”, “surety”, “principal debtor” and “creditor”
- 127Consideration for guarantee
- 128Surety‟s liability
- 130Revocation of continuing guarantee
- 131Revocation of continuing guarantee by surety‟s death
- 132Liability of two persons, primarily liable, not affected by arrangement between them that one shall be surety on other‟s default