Chapter VIII - Of Indemnity and Guarantee
Section 130
Section 130: Revoking a continuing guarantee
Notice can revoke a continuing guarantee for future transactions while leaving already covered transactions to be assessed separately.
On this page
Need advice on Section 130?
This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
A continuing guarantee may at any time be revoked by the surety, as to future transactions, by notice to the creditor.
Illustrations
(a) A, in consideration of B’s discounting, at A’s request, bills of exchange for C, guarantees to B, for twelve months, the due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the extent of 2,000 rupees. Afterwards, at the end of three months, A revokes the guarantee. This revocation discharges A from all liability to B for any subsequent discount. But A is liable to B for the 2,000 rupees, on default of C.
(b) A guarantees to B, to the extent of 10,000 rupees, that C shall pay all the bills that B shall draw upon him. B draws upon C. C accepts the bill. A gives notice of revocation. C dishonours the bill at maturity. A is liable upon his guarantee.
Rule and business relevance
The surety may revoke by notice to the creditor as to future transactions. The illustrations distinguish subsequent discounts from bills already drawn and accepted before notice.
Limits and related provisions
A later due date or default does not necessarily make a transaction future. Identify when the covered transaction arose, not merely when enforcement began.
Hypothetical business example
Hypothetical example: A guarantor notifies a supplier after an existing covered delivery but before another order is supplied. The earlier debt is not erased merely because it falls due after notice.
Practical decision flow
Keep proof of the notice and its receipt by the creditor.
Separate transactions arising before and after the relevant notice.
Assess existing exposure and future dealings under the guarantee and applicable law.
Check the applicable legal framework
This guide explains the central provision. Applicable State amendments, the agreement, transaction date and other governing laws can affect its application. Check the current legal framework before relying on it for a commercial decision.
Practical checklist
Do
- Keep proof of the notice and its receipt by the creditor.
- Separate transactions arising before and after the relevant notice.
- Assess existing exposure and future dealings under the guarantee and applicable law.
Avoid
- A later due date or default does not necessarily make a transaction future. Identify when the covered transaction arose, not merely when enforcement began.
Glossary
- Revocation
- Withdrawal of continuing coverage for future transactions.
- Accrued exposure
- Liability linked to transactions already within the guarantee.
Frequently asked questions
Does revocation cancel all existing debts?
No. Section 130 addresses future transactions.
Does default after notice necessarily avoid liability?
No. The second illustration retains liability on a bill already drawn and accepted.
Who must receive the notice?
The statutory provision identifies the creditor.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026