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Continue Guarantee Means A Guarantee Which Extends To A Series of Transactions. This Is

The document discusses the revocation of continuing guarantees under Tanzanian law. It provides that a continuing guarantee can be revoked by the surety providing notice to the creditor, in the event of the surety's death, or if the creditor and principal debtor change the terms of the contract without the surety's consent. It also examines case law that has explored scenarios where guarantees have been deemed continuing versus single transactions, as well as the implications of a surety's death or changes to the contract terms.

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paco kazungu
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115 views

Continue Guarantee Means A Guarantee Which Extends To A Series of Transactions. This Is

The document discusses the revocation of continuing guarantees under Tanzanian law. It provides that a continuing guarantee can be revoked by the surety providing notice to the creditor, in the event of the surety's death, or if the creditor and principal debtor change the terms of the contract without the surety's consent. It also examines case law that has explored scenarios where guarantees have been deemed continuing versus single transactions, as well as the implications of a surety's death or changes to the contract terms.

Uploaded by

paco kazungu
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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According to the Law of Contract Act, Cap. 345 R.

E 2019 through section 82 provide for


"Revocation of continuing guarantee" it explained that A continuing guarantee may at any
time be revoked by the surety, as to future transactions, by notice to the creditor.

Continue guarantee means a guarantee which extends to a series of transactions. This is


provided under section 81 of The Law of Contract Act, Cap. 345 R.E 2019

Explaination of the section 82 of The Law of Contract Act, Cap. 345 R.E 2019.

"The court of law safeguards the right of surety. Surety has the right to revoke the contract of
guarantee by the notice to the creditor. Similarly the creditor is held in the position of good
faith. If the creditor along with the principal debtor changes any terms of the contract without
the knowledge of surety, the contract of continuing guarantee stands revoked."

There are three ways in which a continuing guarantee can be revoked-

i. By the notice to the creditor


ii. In case of surety’s death
iii. When the terms of contracts are changed without the consent of surety.

For Illustrations

(a) A, in consideration of B's discounting, at A's request, bills of exchange for C, guarantees to B,
for twelve months, the due payment of all such bills to the extent of 5,000 Tshs. B discounts
bills for C to the extent of 2,000 Tshs. Afterwards, at the end of three months, A revokes the
guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A
is liable to B for the 2,000 Tshs, on default of C.

(b) A guarantees to B, to the extent of 10,000 Tshs, that C shall pay all the bills that B shall draw
upon him. B draws upon C. C accepts the bill. A gives notice of revocation. C dishonours the bill
at maturity. A is liable upon his guarantee.

in case of Offord v Davies (1862) 12 CBNS, it was held that surety has to withdraw from the
contract of continuing guarantee before any transactions are made. He cannot withdraw when
the agreement has been acted upon. Also in such cases of revocation the intention to withdraw
must be communicated effectively otherwise it will not be valid.

There is no hard and fast rule to say that a particular guarantee is a continuing guarantee until
and unless it is stipulated in the contract itself. Courts decide this based on the circumstances of
the case and many times surety to a contract have revoked the contracts claiming them to be a
continuing guarantee so it has to be decided by the facts of the case.

in the case of Hasan Ali v. Wali Ullah AIR 1930 All 730, here the lease was signed for a fixed
period of 5 years It was agreed that the lessee would pay the Government revenue, all
expenses relating to the management of the property and Rs, 900 a year to the lessor in two
installments. The surety executed an agreement of guarantee for the fulfillment of the due
obligation. During the period of least the surety gave a notice to the creditor revoking his
guarantee. Creditor then sued the surety as well as principal debtor for the payment of the
lease. The surety defended himself on the ground that it was continuous guarantee and that he
has the right to revoke it by issuing a notice to the creditor.

Court held that the payment of a certain sum in installment for a fixed period of time which in
this case is five years, is not a continuing guarantee and that it will be considered as a single
transaction.

In case of Durga Priya Chowdhury v. Durga Pada Roy AIR 1928 Cal 204, the surety had
guaranteed the due collection and payment of the rent of Creditor’s Zamindari by the Principal
Debtor to the extent of Rs 600 in consideration of employment of Principal debtor as agent.
Afterwards, the surety died. The Principal debtor defaulted and the creditor sued him and legal
representatives of the surety. The legal representatives of the surety contended that being a
continuing guarantee, it was revoked automatically with the death of the surety.

The provisions of the guarantee stipulated that the heirs and the representatives of the surety
would be bound by the terms of the guarantee in the same way as the surety was bound by it.
Referring to this provision, the learned judges held that the guarantee was not revoked even
after the death of the surety and his heirs were liable for any act of the debtor during his
continuance in the service.

In the case of M S Anirudhan V Thomco’s Bank Ltd.(1963) , the defendant guaranteed


repayment of Rs.25,000 which was refused by the bank later. Principal debtor reduced the
amount to Rs.20,000 without the consent of surety and gave it to the bank which was then
accepted by the bank. Later on the principal debtor failed to pay back the amount to the bank
and they sued surety.

It was questioned, whether the alteration in the terms of contract would discharge the surety
from this liability. But the court held by a majority that the surety was not discharged.

In case of Muhammad Ubed Ullah vs Muhammad Inshah Allah Khan (1921) ILR 43 All 132, the
debtor had to furnish to two sureties for good conduct for his admission in postal services. One
of the sureties died and other surviving surety had to pay for the some embezzled sum by the
principal debtor.

The surviving surety instituted a suit for the recovery of half of the amount from the heirs of
deceased co-surety. The court looked at the “contract to the contrary” part of section 131 of
Indian Contract Act. In this contract of guarantee it was clearly stated that the bond should
remain after the death of the sureties and to be continued during the period of service term of
the principal debtor. The only exception was the voluntary termination for which the notice had
to be given 6 months prior. It was contended that the last clause implies that the guarantee can
be terminated after death of the surety.

The court held that the last clause of termination was only an exception and it doesn’t import
that the death of one of the securities by itself would terminate the responsibility. If a notice
had been issued during the lifetime of the surety or after his death by representatives, only
then the contract of guarantee had been revoked.

In conclusion. Contract of continuing guarantee has been defined in The Law of Contract Act,
Cap. 345 R.E 2019. It is a contract between the surety and creditor in default of the principal
debtor. The court upholds the right of the surety in such contracts and puts the onus of good
faith on the creditor. Thus the revocation of continuing guarantee can be done by the notice of
the surety to the creditor and in case of surety’s death. Last one is when the creditor and
principal debtor change the terms of contract would out the consent of surety. These ways the
continuous guarantee can be revoked.

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