Section 131 The Indian Contract Act, 1872
Section 131 – The Indian Contract Act, 1872
"Revocation of continuing guarantee by surety’s death."
Bare Act Language:
Section 131 states:
"The death of the surety operates, in the absence of any contract to the contrary, as a revocation of a continuing guarantee, so far as regards future transactions."
Explanation:
A continuing guarantee is a guarantee that extends to a series of transactions (not just one).
If the surety (guarantor) dies, the guarantee is automatically revoked for any future transactions, unless there is a specific contractual clause saying otherwise.
The liability of the surety still remains for transactions done before his death, but not for those done after.
Example:
Let’s say:
A guarantees to B the payment for goods that C will buy from B from time to time, up to ₹1,00,000.
A dies after some purchases worth ₹40,000 are made by C.
A’s guarantee remains valid for the ₹40,000 already bought.
But after A’s death, unless there’s a contract saying the guarantee continues, B cannot claim against A’s estate for goods bought by C after A’s death.
Key Point:
Section 131 protects the estate of a deceased surety from unknown future liabilities, unless they have explicitly agreed otherwise.
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