A contract of guarantee could also be for an associate in nursing’s existing liability or future liability. A contract of guarantee may be a particular guarantee (for any specific dealings only) or a continued guarantee.

There are two sorts of guarantee contracts:

specific guarantee and an ongoing guarantee. A specific or simple guarantee is one that is made in respect of a single debt or unique transaction and is set to expire when the guaranteed debt is paid or the promise is fulfilled. An ongoing guarantee, on the other hand, is a guarantee that covers a series of transactions (Section129). In this instance, the surety’s liability would remain until all of the transactions were completed or the guarantor revoked the guarantee for future transactions.

Specific Guarantee 

A particular guarantee is for one debt or any specific dealings. It involves associates finishing once such debt has been paid.Continuing GuaranteeAct in 1872 defines 

Continuing Guarantee- 

A continuing guarantee is a form of assurance that covers many transactions. Until the surety revokes it, it applies to all transactions engaged into by the principal debtor. As a result, bankers prefer a continuing guarantee because the guarantor’s duty is not limited to the original advances and extends to all subsequent defaults.

A continuing guarantee’s most crucial feature is that it applies to a succession of separate, independent transactions (series of transactions). As a result, a promise for the full consideration cannot be considered a continuing guarantee

.A continuing guarantee applies to any or all the transactions entered into by the principal mortal till it’s revoked by the surety. a seamless guarantee may be revoked anytime by the surety for future transactions by giving notice to the creditors. However, the liability of a surety isn’t reduced for transactions entered into before such revocation of guarantee.

Illustration-

a) S is a bookseller who gives P a collection of books with the understanding that if the person P is not able to pay for the books, his or her friend X will. This is a contract of particular guarantee, and K’s liability ends the minute S receives payment for the books.

b) A wealthy landlord hires P as his estate manager after M recommends him. P was responsible for collecting rent from S’s renters each month and remitting it to S by the 15th of each month. M, as the guarantee, undertakes to make good on any defaults made by P. This is a contract with a long-term guarantee.

Revocation of Continuing Guarantee

It must be agreed upon by all three parties – All the three parties to the transaction that are the principal debtor, creditor, and surety, must consent with each other’s approval. It is to be noted that  the surety will only accept for the major debtor’s debt if the principal debtor expressly demands it. Now the outcome is that the primary debtor must interact with the surety. The surety’s communication with the creditor guarantee transaction without informing the primary debtor does not constitute a guarantee contract.

Take into account anything done for the benefit of the principal debtor is to the surety for delivering the guarantee. The consideration from the creditor, not one from the past. It is not necessary for the guarantor to receive any value, and sometimes what happens is even the creditor’s tolerance in the event of default is sufficient consideration.

Accountability – A surety’s liability is secondary under a guarantee arrangement. This tells that the primary contract was between the creditor and the principal debtor. The surety is solely responsible for repayment if the principal debtor defaults.

Assume the presence of a debt – The fundamental purpose of a guarantee contract is to ensure the payment of the major debtor’s obligation. if there is no such debt. As a result, in circumstances where the debt is time-barred or void, the surety has no duty. In the Scottish case the House of Lords concluded that there can be no legitimate guarantee if there is no principal obligation.

It must include all of the fundamental elements of a legitimate contract as the  guarantee contract is an agreement, it must meet all of the standards as a legal contract. 

No False Information – Any circumstances that may affect the surety’s obligation must be disclosed by the creditor to the surety. The confidence gained through the concealment of such knowledge is invalid. As a consequence, if a creditor secures such guarantee by omitting substantial information, the guarantee will be null and unenforceable.

There will be no misrepresentation – This to be noted that the guarantee shouldn’t be acquired by misrepresenting the facts to the surety. It does not require  the primary debtor even while it is not a contract of Uberrima fides, or ultimate good faith.