Discuss the various kinds of Guarantee. and also discuss Revocation or termination of a continuing guarantee. A becomes surety to B for the amounts he lends to C up to Rs.10,000 at 20 percent per annum. Afterwards, when B had already lent Rs.6,000 to C they mutually agree that the rate of interest for the subsequent loans should be reduced to 10 percent only. A is discharged from the liability for the subsequent loans.

Kinds of Guarantee:-

A guarantee may be given for the payment of debt , for the payment of the price of goods sold on credit, the good conduct or honesty of a person employed in a particular office. In last case, the guarantee is called a fidelity guarantee. A guarantee may be given for existing or future , debt or obligation. In the former case it is called retrospective guarantee and in latter case it is termed as  prospective  guarantee. A guarantee may be in respect of a single transaction or a number of transactions.

Specific guarantee-

 When a guarantee extends to a single transaction or debt it is called as a specific  or simple  guarantee. It comes to an end when the guaranteed debt is duly discharged or the promise is duly performed.

Continuing guarantee- 

When a guarantee extends to a series of transactions, it is called as continuing guarantee( Sec. 129 ). The liability of the surety in case of a continuing guarantee extends to all the transactions contemplated until the evocation of guarantee.

 Examples 

S guarantees payment of C, a tea dealer, to the amount of Rs.10,000 for any tea he may from time to time supply to P. C supplies P with tea to the value above Rs.10,000 and P pays for it to C. Afterwards C supplies P with tea to the value of Rs.20,000P fails to pay it. The guarantee given by S is a continuing guarantee and he is accordingly  liable to C to extent of Rs.10,000. 

There can be continuing guarantee for a fixed period. A continuing guarantee only speaks of continuing transactions and not the period of such transactions

Revocation or termination of a continuing guarantee- A continuing guarantee may be revoked: 

1. By notice. A continuing guarantee may at any time be revoked by the surety as to the future transactions, by the notice to the creditor. ( Sec. 130)

2. By the death of surety. The death of the surety generally operates as a revocation of a continuing guarantee, so far as regards future transactions ( Sec. 131 )

3. By variance in terms of the contract. Any variance, made without surety’s consent, in the terms of the contract , between the principal debtor and the creditor, discharges  the surety as to the transactions subsequent to the variance. (Sec. 133 )    

Example. 

A becomes surety to B for the amounts he lends to C up to Rs.10,000 at 20 percent per annum. Afterwards, when B had already lent Rs.6,000 to C they mutually agree that the rate of interest for the subsequent loans should be reduced to 10 percent only. A is discharged from the liability for the subsequent loans.

4. By novation. A continuing guarantee can be also determined by the novation which means substitution of the new contract for the old one.

Release or discharge of principal debtor. 

If the principal debtor is released or discharged by any contract between the creditor and the principal debtor or by any act or the omission of the creditor, the continuing guarantee is terminated.( Sec. 134 )

Arrangement with the principal debtor. 

If without the consent of surety there is a contract between the creditor and the principal debtor, by which the creditor makes the composition of debt with the principal debtor or gives him time for the repayment of the debt or promises not to sue him, the continuing guarantee terminates .( Sec. 135 )

Act or omission imparting surety’s eventual remedy. 

If the creditor does any act which is inconsistent with the rights of the surety or omits to do any act which his duty to the surety requires him to do and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the continuing guarantee.

Loss of security

If the creditor loses, or without the consent of the surety parts with the security given to him by the principal debtor at the time of the contract , the continuing guarantee terminates. ( Sec. 141 )