As per “Section 129” of “the Indian Contract Act, 1872”, a Guarantee that extends to a series and multitudes of transactions is known as a “Continuing Guarantee” in a contract. These guarantees have a set time limit and a set time or for a specified period, perhaps one month, one year, etc. Continuous Guarantee does not come after the issuance of a single promise or payment of a single debt or transaction. It is up to Surety to ensure that the debt relating to time or amount can be limited according to his wishes and interest. Under ongoing debt, Surety is responsible for unpaid and left balance at the end of the guarantee
Continuing Guarantee is of two types:-
The former one is given for future debt(s) and the latter one is given for existing debt(s).
Nature of continuing guarantee contract
An important feature of Continuous Certification is that it is functional and is related to a series of different, unique functions. Therefore, when a guarantee of full consideration is given, it cannot be defined as a continuous guarantee. ‘
In the case of Nottingham Hide Co vs. Bottrill, it was stated that “the facts, circumstances, and intention of each case has to be looked into for determining if it is a case of continuing guarantee or not. If the contracts are entered into by misrepresentation or fraud made by the creditor regarding material circumstances or by concealment of material facts by the creditor, the contract will be considered invalid and void.
Once the guarantor commits to his liability by paying the required debt to the creditor, he steps into the shoes of the creditor and avails all the rights that the creditor had over the principal debtor.” All transactions entered by the principal debtor until they are revoked by that security shall be subject to a continuing guarantee. A guarantee for future transactions can be revoked at any time by notification to the debtors. However, for transactions entered before such cancellation of the guarantee the liability of a guarantor shall not be reduced.
Liability of the surety continuing guarantee contract
Surety’s credit policy is provided under Section 128 of the Indian Contract Act, 1972 which stipulates Surety’s debt is collectively and of the Principal Debtor unless otherwise provided by another contract. Surety continues to be responsible for the functions assigned to the Lender to the Principal Borrower. Surety is responsible for any amount that may be generated from periodic transactions or transactions between the Supplier and the principal Credit. Surety is out of debt when he returns his guarantee. Surety Debt follows the contract and as a result, if the principal debtor is not liable, the security will also not be liable.
Different modes of revocation continuing guarantee contract
By giving a Notice – when the work is done and in progress, the Surety liability in respect of that particular work cannot be cancelled or cancelled. Only future transactions are valid. Guarantee cannot withdraw / cancel its liability only by giving notice. If the warranty contract sets out the clause for a period of time required to be met before the contract can be cancelled or cancel, then Strongly may be able to avoid liabilities.
In the case of Offord v. Davies, the guarantee had ensured that debts would be paid that would be reduced by the Credit Provider. It was supposed to be done for a period of 1 year up to $ 600. The lender continued to reduce the debt even if Surety had cancelled his guarantee before any loan was issued, the Borrower failed to pay the debts. “There was a guarantee that the collateral would not be liable for the debts that were deducted after withdrawing the guarantee.”
On death of the Surety – the ongoing warranty contract ends with the death of Surety. It automatically tries for future transactions. However, Surety’s heirs can be held accountable for those acts committed before his death. If there is any agreement in a particular contract that guarantees that in the death of Surety, his property or legal representatives or heirs or attorneys may be prosecuted and liable for any debt or violation committed, it shall be a contract contrary to the definition of Section 131 of the Indian Contract Act, 1972, and guarantee it was not returned even after Surety’s death.
In Durga Priya Chowdhury v. Durga Pada Roy, Surety provided proof of collection and payment of Zamitorari Creditor rent by Principal Debtor. The amount of Rs. 600 and the consideration of the appointment of the principal Debtor as an agent was explained. Later, with the death of Surety, the Principal debtor failed and the creditor sued him and the defendants’ lawyers. Proponents of her case have been working to make the actual transcript of this statement available online. “The guarantees of the guarantee mean that the heirs and representatives of Surety will be bound and bound in terms of the guarantee in the same manner as the security for which they were bound. Educated judges said the guarantee was not revoked even after the death of Surety and his heirs. ”
Changes made in the terms and conditions of the contract without Surety’s Consent
a continuous guarantee contract is terminated if there is a change and amendment made in terms of the terms and conditions of the contract between the Principal Debtor and the Debtor without the consent of the Guarantee. Surety is exempt from his debt for further transaction of a separate transaction made.
In the case of Bishwanath Agarwal vs. State Bank of India, Surety has made an ongoing guarantee of up to Rs 2,50,000 to obtain the loan amount and interest paid by the Principal Loan to the lender from time to time. The debtor fails to repay the loan and the overdraft is made in excess of that limit on the same loan account without Surety’s consent. “Surety was charged with up to Rs 2,50,000 and was not liable for any excess over the amount disbursed by the bank to the Borrower without bail.
Author: RISHIKA VERMA,
Amity University Madhya Pradesh 2nd year