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Section 130, Contract Act 1872: Revocation Of Continuing Guarantee

Section 130 under the Chapter VIII (Of indemnity and guarantee) of the Contract Act, 1872 of India - 'Revocation of continuing guarantee', is reproduced hereunder:—

“A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.

Illustrations

(a) A, in consideration of B's discounting, at, A's request, bills of exchange for C, guarantees to B, for twelve months, the due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the end of three months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A is liable to B for the 2, 000 rupees, on default of C.

(b) A guarantees to B, to the extend of 10,000 rupees, that C shall pay all the bills that B shall draw upon him. B draws upon C. C accepts the bill. A gives notice of revocation. C dishonours the bill at maturity, A is liable upon his guarantee.”

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