“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.
Continuing Guarantee
A continuing guarantee is a promise that covers many transactions over a period of time, not just one single deal.
Examples
(a) A tells B: “If you give C a job to collect rent, I will be responsible up to ₹5,000 if C does not pay properly.” This is a continuing guarantee because it applies to all rent collections done over time, not just one instance.
(b) A tells B (a tea seller): “If you supply tea to C, I will guarantee payment up to £100 for any tea you give from time to time.”
- First, B supplies tea worth more than £100, and C pays fully.
- Later, B again supplies tea worth £200, but this time C does not pay.
A’s guarantee still applies because it is continuing. So, A must pay up to £100 to B.
(c) A tells B: “I guarantee payment for 5 sacks of flour that you will give to C.”
- B gives 5 sacks → C pays for them.
- Later, B gives 4 more sacks → C does not pay.
The guarantee was only for those first 5 sacks, not for future supplies. So, this is not a continuing guarantee. A is not responsible for the 4 extra sacks.
In Short
- Covers many or repeated transactions → Continuing guarantee
- Covers only one specific deal → Not a continuing guarantee