Note on Continuing guarantee, Specific guarantee, Promise and reciprocal promises

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Q-4 Writes a Note on Continuing guarantee, Specific guarantee, Promise and reciprocal promises


A guarantee, which extends to a series of transactions, is called a “continuing guarantee’. A surety’s liability continues until the revocation of the guarantee.



On S’s recommendation, C employed P for the collection of rent from his. tenants. S promised to make good ay default made by P. This is a contract of continuing guarantee. A continuing guarantee may be given for a part of the entire debt or for the entire debt subject to a limit.



X gives guarantee for the loans given by Y to 2. Z owes Rs 1,00,000/= to Y. X may give this guarantee in the following forms:

Form (a): I guarantee the payment, of the loan of Rs 60,000/- by Y to Z

Form (b): I guarantee the payment of the loan by Y to Z subject to the limit of Rs 60,000/=

The distinction between these two forms becomes clear when Z becomes insolvent. Let us suppose that Z becomes insolvent and his estate pays 30 paisa in a rupee. In this case, the rights of X and Y will be as under:

Right In case of guarantee for a part of debt [Form (a)] In case of guarantee for the entire debt subject to a limit [Form (b)]
Right of Y Y can recover Rs 60,000 from X and Rs 12,000 (being 30% of the balance of Rs 40,000) from Z’s estate. Y can recover Rs 60,000/= from X and Rs 30,000/= (being 30% of the entire debt of Rs 1,00,000) from Z’s estate.
Right of X After paying Rs 60,000/= to Y, X can recover Rs 18,000/= (being 30% of Rs 60,000) from Z’s estate X will not get anything from Z’s estate till the entire debt o Rs 1,00,000/= is paid to Y.



A guarantee, which extends to a single debt or specific transaction, is called a “specific guarantee. The liability of the surety comes to an end when the guaranteed debt is duly discharged or the promise is duly performed.



X guarantees payment to Y of the price of the five bags of flour to be delivered by Y to Z and to be paid for in a month. Y delivers five bags to Z, Z pays for them. This is a contract of specific guarantee because X intended to guarantee only for the payment of price of the first five bags of flour to be delivered at one time



X gave his godown to Y on a lease for 10 years on a lease rent of Rs 12,000/= p.a. Z guaranteed that V would fulfill his obligations. This is a contract of specific guarantee because the lease for 10 years is entirely an indivisible transaction and cannot be classified as a series of distinct transaction.



The word promise is defined in the Contract Act Sec 2 (b) in the following words, “A proposal when accepted, become a promise

Generally two parties are involved in the promise. The person who makes the offer is called promisor. While a person who accepts the offer is called promisee.



Suppose Mr. Ghazi offers to sell his car for Rs, 60,000/= to Mr. Ata. Ata accepts the offer. Now it will become a promise.



Reciprocal means mutual. Those promises, which form consideration or part of the consideration for each other, are called reciprocal promises.


Kinds of Reciprocal Promises

Following are the kinds of reciprocal promises.


It is the second important kind of reciprocal promises. In this contract each party has to perform his party with out waiting the readiness of the other party.



In this case reciprocal promises are performed simultaneously. If one party ready to perform a promise other party should also perform the reciprocal promise at the same time. If one party ready to pay the amount demanded and other party is not ready to deliver the particular good. The performance of the contract will be not possible.



In case of first of all order is perform and then its reciprocal is received.



Mr. Asif contract with Mr. Nawab to build his bathroom for Rs. 15000/=. As promise to build the bathroom must be performed before payment.



In these cases first set of promises is legal and other set illegal. So first part is a valid and second is void agreement.



Mr. Kashif agree to sell his gun to Mr. Anwer for Rs. 2000/= but if Mr. Anwer uses it in killing the animals, pay Rs 1000/= for it. The first set of promises is legal and other is illegal. 



In these cases if one party does not perform the prior condition, the other party cannot be called upon to perform his promise. Probing the motives of this fine, strong, conscientious, blundering

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