What do you mean by continuing guarantee and state as to what matter it different from ordinary guarantee? Also explain the mode of termination of continuing with its consequences.
Ans. Definition of Continuing Guarantee- According to S. 129, “A guarantee which extends to a series of transactions is called a continuing guarantee.”
(i) A, in consideration that B will employ C “in collecting rents of B’s zamindari promises B to be responsible to the amount of 5,000 rupees for the due collection and payment by C of those rents. This is a continuing guarantee.
(ii) A guarantees payment to B, a tea-dealer, to the amount off . 100 for any tea he may from time to time supply to C. B supplies C with tea of more than the value of 100 and C pays B for it. Afterwards B suppress C with tea to the value £ 200. C fails to pay. The guarantee given by A was a continuing guarantee, and he is accordingly liable to B to the extent of £ 100.
(iii) A guarantees payment to B of the price of five sacks of flour to be delivered by B to C and to be paid for in a month. B delivers five sacks to C. C pays for them. Afterwards B delivers four sacks to C, which C does not pay for. The guarantee given by A was not a continuing guarantee, and accordingly he is not liable for the price of the four sacks : S. 129.
Difference Between Ordinary and Continuing Guarantee—The distinction between an ordinarily and a continuing guarantee is that under former, the surety is liable only in respect of a single transaction, whereas under the latter, the surety is prima facie liable in respect of any of the successive transactions which come within its scope. The question whether a guarantee is continuing or not must be. ascertained by looking to the intention of the parties and the surrounding circumstances. As said in one English case, the Court has power “not to alter the language, but to fill up the instrument where it is silent and to apply to the subject-matter to which the parties intended it to be applied.”