Section 129 Indian Contract Act 1872 - Continuing Guarantee

Section 129 of the Indian Contract Act, 1872 defines a continuing guarantee. It is a guarantee that extends to a series of transactions rather than being confined to one specified transaction.

What is a continuing guarantee under Section 129?

Chapter VIII of the Indian Contract Act, 1872 deals with indemnity and guarantee. Section 126 defines a contract of guarantee and the expressions surety, principal debtor and creditor. Section 129 then identifies when a guarantee is continuing in character.

Section 129 - Continuing guarantee

A guarantee which extends to a series of transactions is called a "continuing guarantee".

The essential feature is therefore the contemplated series of transactions. A guarantee limited to one particular transaction does not become a continuing guarantee merely because later dealings occur between the same parties.

Meaning and practical effect

A continuing guarantee may cover recurring supplies, repeated advances, a running account or another continuing course of dealings, depending on the wording and scope of the guarantee. The surety's responsibility is governed by the terms of the guarantee and the applicable provisions of the Contract Act.

Section 128 is also relevant because, unless the contract provides otherwise, the surety's liability is co-extensive with that of the principal debtor. For a continuing guarantee, Sections 130 and 131 deal specifically with revocation for future transactions by notice and, subject to contract, by the death of the surety.

Statutory illustrations to Section 129

Illustration (a): Employment and collection of rent. A promises B to be responsible, up to 5,000 rupees, for C's due collection and payment of rents while C is employed to collect them. Because the undertaking covers a continuing series of collections, it is a continuing guarantee.
Illustration (b): Repeated supply of goods. A guarantees payment to B, a tea dealer, up to 100 for tea supplied from time to time to C. After an earlier supply is paid for, a later supply remains unpaid. The guarantee is continuing and A is liable within the guaranteed limit.
Illustration (c): Guarantee confined to one delivery. A guarantees the price of five sacks of flour to be delivered by B to C. After that transaction is completed and paid, B makes a later delivery which is not paid for. The original guarantee was for the specified transaction and was not a continuing guarantee.

Continuing guarantee and specific guarantee

A specific guarantee is ordinarily exhausted when the particular transaction for which it was given is completed. A continuing guarantee is intended to operate across successive transactions within its agreed scope. Whether a guarantee falls into either category depends principally on the language of the guarantee and the nature of the transactions it covers.

Revocation of a continuing guarantee

Section 130 permits a continuing guarantee to be revoked by the surety, as to future transactions, by notice to the creditor. Section 131 provides that the death of the surety operates, in the absence of a contract to the contrary, as revocation of a continuing guarantee so far as future transactions are concerned.

Important: Revocation in relation to future transactions does not by itself erase liability already incurred for transactions covered by the guarantee before the revocation took effect.

Related provisions of the Indian Contract Act

The definition in Section 129 should be read with Section 126 on contracts of guarantee, Section 127 on consideration, Section 128 on the extent of the surety's liability, and Sections 130 and 131 on revocation of a continuing guarantee.

Official text of the law

For the current official text and amendments, refer to the Government of India's India Code version of the Indian Contract Act, 1872.

Indian Contract Act, 1872 - official India Code PDF