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CMA Foundation · Fundamentals of Business Laws and Business Communication · Meaning of Indemnity, Guarantee, Pledge, Agent

Ramesh gives a continuing guarantee to a wholesaler for goods to be supplied to Sunil from time to time. Ramesh dies, and there is no contract to the contrary. What is the effect of his death?

Ramesh's death revokes the continuing guarantee as regards future transactions, because Section 131 provides this in the absence of any contract to the contrary. Supplies already made before his death remain covered, while later supplies to Sunil are not.

  1. AIt revokes the guarantee for future transactionsCorrect
  2. BIt revokes the guarantee for past transactions also
  3. CIt has no effect, and the guarantee continues for all future supplies
  4. DIt converts the guarantee into a contract of indemnity

Explanation

Section 131 says the death of the surety, in the absence of a contract to the contrary, revokes a continuing guarantee so far as regards future transactions. Past transactions already made remain covered, so revocation of past transactions is wrong. Nothing converts the guarantee into indemnity.

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