Section 128 – THE INDIAN CONTRACT ACT, 1872

“Continuing 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.

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Practice area's of B K Goyal & Co LLP

Company Registration Services in major cities of India

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