Section 131 of ICA : Section 131: Revocation Of Continuing Guarantee By Surety'S Death

Explanation using Example

Imagine that Rita is a business owner who frequently purchases supplies on credit from Vinod's Supply Co. To secure the credit, Rita's friend, Arjun, acts as a surety, providing a continuing guarantee for Rita's purchases. This means Arjun has agreed to be responsible for any credit that Rita takes out and fails to repay.

Unfortunately, Arjun passes away. According to Section 131 of The Indian Contract Act, 1872, Arjun's death will revoke the continuing guarantee he provided for Rita's future transactions with Vinod's Supply Co. This revocation is automatic and does not require any action from Arjun's estate or the other parties, unless there was a specific agreement in place that stated the guarantee would continue even after Arjun's death. As a result, Vinod's Supply Co. may no longer extend credit to Rita on the basis of Arjun's guarantee, and they may ask Rita to provide a new surety for future transactions.