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Section 129 of Indian Contract Act

LLB Varun

ā€œContinuing guaranteeā€.ā€” A guarantee which extends to a series of transactions, is called a ā€œcontinuing guaranteeā€.

Illustrations

(a) A, in consideration that B will employ C in collecting the rent of Bā€™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 Ā£100, for any tea he may from time to time supply to C. B supplies C with tea to above the value of Ā£100, and C pays B for it. Afterwards, B supplies C with tea to the value of Ā£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 Ā£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: ā€œIf you give C a job to collect rent, I will be responsible up to ā‚¹5,000 if C does not pay properly.ā€ 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): ā€œIf you supply tea to C, I will guarantee payment up to Ā£100 for any tea you give from time to time.ā€

  • First, B supplies tea worth more than Ā£100, and C pays fully.
  • Later, B again supplies tea worth Ā£200, but this time C does not pay.

Aā€™s guarantee still applies because it is continuing. So, A must pay up to Ā£100 to B.

(c) A tells B: ā€œI guarantee payment for 5 sacks of flour that you will give to C.ā€

  • B gives 5 sacks ā†’ C pays for them.
  • Later, B gives 4 more sacks ā†’ 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 ā†’ Continuing guarantee
  • Covers only one specific deal ā†’ Not a continuing guarantee