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

Under the Indian Contract Act, 1872, in the absence of any contract to the contrary, the death of the surety operates as a revocation of a continuing guarantee:

The death of the surety revokes a continuing guarantee only as regards future transactions, unless the contract provides otherwise. No notice to the creditor is needed for this. Liability for transactions already made before the death is not wiped out by Section 131.

  1. AFor all transactions, past and future
  2. BOnly as regards future transactionsCorrect
  3. COnly if the creditor receives notice of death
  4. DNot at all, as the liability passes to the heirs for future transactions

Explanation

Section 131 states that the surety's death revokes a continuing guarantee so far as regards future transactions, unless there is a contract to the contrary. No notice is required for this effect. Past transactions remain covered.

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