THE NATIONAL LAW INSTITUTE

UNIVERSITY, BHOPAL

LAW OF CONTRACT II

MID-TERM SYNOPSIS

CONTINUING GUARANTEE: NATURE AND MODES OF

REVOCATION

Submitted by: Submitted to:

Yashpal Mrs. Padma Singh
2020BALLB 120

SECOND SEMESTER
B. A. LL. B. (Hons.)

MARCH 2021
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INTRODUCTION

According to the Indian Contract Act, 1872, Guarantee is the assurance that a legally valid
contract will be duly enforced by the parties of that contract. Section 126 of the Indian Contract
Act defines the contract of guarantee, “it is a contract to perform the promise or discharge the
liability of the defaulting party in case he fails to fulfill his contractual obligations.”

Generally the contract of guarantee has three parties in it and one of the parties act as the surety
of another case, in case it fails to fulfill the contractual obligations. Most common examples of
guarantee contracts are loan agreements and agreements related to goods or employment. The
guarantor assures the creditor under such contracts that the party in need can be trusted and that
he or she is responsible for paying for any default. We can therefore assume that a guarantee
agreement is a transparent security for the lender. 

Guarantee contracts can be divided into two types: specific guarantee and continuing guarantee.
If a guarantee is issued on an individual debt or transaction that comes to an end when the
promised debt is paid or when the promise is fulfilled accordingly, it is known to be a specific or
simple guarantee. A guarantee that applies to a number of transactions is nevertheless considered
a continuing guarantee. That is covered under section 129 of Indian Contract Act, 1872. In that
case, the responsibility of the surety will remain until all transactions have been completed or
until the guarantee on further transactions has been revoked.

This doctrinal project will discuss the Continuing Guarantee its nature and modes of revocation.
The project will also discuss the difference between specific guarantee and continuing guarantee.
Liability of surety under continuing guarantee and revocation of guarantee will also be discussed
in this research project. Cases related to the continuing guarantee and modes of revocation will
also be discussed in this project.

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LITERATURE REVIEW

In order to this doctrinal various literary sources were taken into consideration which included
books, scholarly articles, journals, research papers. Apart from that many blogs and websites
were also referred while completing this project. Some of the prominent sources which were
referred are as follows:

1. “Textbook on Contract and Specific Relief” by Avtar Singh1

This renowned textbook on Indian Contract Act, 1872 and Specific Relief by noted jurist
and writer Dr. Avtar Singh was referred while working on this doctrinal project. This
book provides in depth knowledge of the Statutes and Sections with the help of relevant
cases. All the sections related to continuing guarantee and its modes of revocation present
in Indian Contract Act are thoroughly explained by the author along with several
important cases and some of the cases are also cited in this project for better
understanding of the topic.

2. Black’s Law Dictionary2 and Guide for Contract Act by A.K. Jain
In order to complete this doctrinal project on the nature and modes of revocation of
continuing guarantee reference of these literary sources was also taken. The Black’s Law
Dictionary helped in finding the meaning of critical legal words that were used in the
statues and A.K Jain guide for Indian Contract Act, 1872 helped in finding certain
important explanations to the laws.

3. Article titled, “Continuing Guarantee: Nature and Modes of Revocation”3

1
Singh, Avtar. Textbook on Contract and Specific Relief, 12thEdn, 2017, Eastern Book Co. Lucknow.
2
Garner, B. and Black, H., 2019. Black's law dictionary. St. Paul, MN: Thomson Reuters.
3
Legalserviceindia.com. 2019. Continuing guarantee: Nature and modes of revocation. [online] Available at:
<http://www.legalserviceindia.com/legal/article-3950-continuing-guarantee-nature-and-modes-of-revocation.html>
[Accessed 21 March 2021].

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This article published on the website of Legal Service India was also referred while
completing this project. This article provides useful information about continuing
guarantee, its nature and modes of revocation.

STATEMENT OF PROBLEM

Continuing Guarantee is a type of contract present under 129 of Indian Contract Act, 1872.
There are various methods in which a continue guarantee can be revoked. This doctrinal project
will study and analyze the contracts of guarantee with special reference to the continuing
guarantee its nature and modes of revocation so that the parties are freed from their contractual
obligations.

OBJECTIVES

i. The primary objective of this project is to study and analyze the contracts of guarantee
with special reference to the continuing guarantee.
ii. To study and understand the nature of contracts formed under continuing guarantee.

iii. Analyze and evaluate the modes of revocation of continuing guarantee.

iv. To study and analyze the English law on continuing guarantee.

HYPOTHESIS

A “contract of guarantee” is an legally enforceable agreement to perform the promise or

discharge the liability of any third person when he fails to perform his contractual obligations. A
contract of guarantee is of two types: specific guarantee and continuing guarantee. In this project
the continuing guarantee will be studied and analyzed with relevant cases. The sole objective of

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this project is to study and understand the meaning, nature and modes of revocation of
continuing guarantee.

RESEARCH QUESTIONS

i. What are the contracts of guarantee?

ii. What is the meaning and nature of continuing guarantee?

iii. What are the modes of revocation of continuing guarantee?

iv. What is the English law on continuing guarantee?

WORK PLAN

1. Continuing guarantee: Meaning

2. Specific guarantee and continuing guarantee
3. Modes of revocation of continuing guarantee
3.1. By notice (Section.130)
3.2. By death of the Surety (Section.131)
3.3. By variance in the terms of the contract between debtor and creditor. (Section.133)
4. English law on continuing guarantee
5. Conclusion and Suggestion
6. Bibliography