Q-10: Describe the procedure of revocation of continuing guarantee.
Ans: A continuing guarantee as to future transaction may be revoked in any of the ways below:
a) BY NOTICE REVOCATION [SECTION 130]
A continuing guarantee may at any time be revoke by the surety as to the future transactions by notice to the creditor. However the remains liable for the past transaction, which have already taken, place.
X gives guarantee to the extent of Rs. 60,000/= for the loans from time to time by Y to Z, Y gave a loan of Rs 20,000/- to Z. Afterwards, X gives notice of revocation. X is discharged from all liability to Y any loan granted after the revocation of guarantee but he is liable to Y for 20,000/= on default of Z.
b) BY DEATH OF SURETY [SECTION 131]
In the absence of any contract to the contrary, the death of surety operates as a revocation of a continuing guarantee as to the future transaction-taking place after the death surety. However, the surety’s estate remains liable for the transaction, which have already taken place before the death of surety.
c) BY MOOES OF DISCHARGING THE SURETY
A continuing guarantee is also revoked in the same manner in which the surety is discharged such as. (i) Novation [Section 62]
(ii) Various in terms of contract [Section 133]
(iii) Release or discharged of principal debtor [Section 134]
(iv) When the creditor enter into a arrangement with the principal debtor [Section 135]
(v) Creditor’s act or omission impairing surety’s eventual remedy [Section 139]
(vi) Loss of security [Section 141]